Deposits still hard to raise despite a weak decade for house prices

House price growth in the past decade was at its weakest for 30 years - and despite that it remains though for buyers to afford a deposit on a home according to the Nationwide. 

The lender has analysed market data over the course of the last 10 years and says that prices have risen an average of 33 per cent - a far cry from the 180 per cent increase in the 1980s, for example. 

The Nationwide says today’s typical 20 per cent deposit is now equivalent to the entire pre-tax income of an average earner, whereas a decade ago it was 88 per cent. 

There are plenty of regional variations to this of course: assuming a potential buyer sets aside some 15 per cent of their income, in the South West it would now take around 10 years for an average earner to amass a deposit of 20 per cent of the price of a typical home.

That’s up from just eight years at the end of 2009. 

The Nationwide says pressures are most acute in the capital, where someone earning an average income would need around 15 years to save a 20 per cent deposit on a typical London property, up from 10 years a decade ago.

However, there is a glimmer of optimism - Nationwide says mortgage affordability has actually improved for prospective first time buyers in recent years, with the cost of servicing the typical mortgage as a share of take home pay in most regions now lower than it was in 2009. 

This is due to the fall in borrowing costs, with average interest rates for new mortgages falling from around 5.0 per cent in 2009 to 2.4 per cent currently.

“We’ve looked at how the last 10 years compares with previous decades across a variety of housing metrics. The 2010s has been the weakest decade for house price growth since the 1990s; nevertheless, prices still rose by 33 per cent over the decade, somewhat above the 20 per cent rise in average incomes over the same period” explains Andrew Harvey, Nationwide's senior economist.

“Despite recent weakness, London has been the top performing region over the last decade, with house prices rising twice as fast as the UK average at 66 per cent” he says. 

“The northern regions - in particular the North, Yorkshire and Humberside and North West - saw relatively weak house price growth over the decade, with prices slow to recover following the financial crisis. House price growth has remained subdued in Scotland, with just an eight per cent rise over the past 10 years. Northern Ireland saw the lowest growth, with prices up two per cent compared with the end of 2009.”