House Price Forecast – The avg UK deposit needed in 2020 could be as high as £82,000
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House Price Forecast – The avg UK deposit needed in 2020 could be as high as £82,000

Clock  3 minute read

Carl Shave Carl Shave | October 9, 2017

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House prices are never far from people’s minds, whether you’re a first time buyer or have a portfolio of properties, the direction the housing market goes can have a huge impact on your finance. Using the data provided via the ONS and other leading sources we’ve prepared a tool to help show you where housing prices have come from and where they could go in the future.

– Back in 2000, average house prices were as low as £90,000 which is three times less than they are today – Even today many will need to find a £72,500 deposit to buy their ideal home. – The average deposit needed in 2020 could be as high as £82,000!

The tool below will show you how this varies from 2000 through to 2020, you can change the data range or select the price outlook (for the forecast) below.

The Forecast Tool

Average House Price: {{ house_price | currency('£', 0) }}

Average Household Income: {{ household_income | currency('£', 0) }}

Maximum Mortgage: {{ forecast.settings.multiplier * household_income | currency('£', 0) }}

Deposit Needed: {{ deposit_required | currency('£', 0) }}

Income / House Price Ratio:

{{ ratio }}

House Price Outlook

How to use this tool

We start off with the average house price in the UK in that given year – based on ONS data, pre-2017 & then forecasted using one of three methods (see below). We then use the tradingeconomics.com salary data (x4.5) to establish that the likely maximum mortgage is. So if the average income is £45,000 x4.5 = £202,500, giving you a very approximate figure. To establish the level of deposit you’ll likely need, it’s a case of taking the average house price for that year & then deducting the max mortgage figure. For the 2017 example, £275,000 – £202,500 = £72,500 would needed as a deposit.

Golden Ratio

The key of this is the income/house price ratio in the top right – the lower the number, the better (as this mean houses are more affordable). The golden number on this ratio is 4.5, this is because the majority of those looking for a mortgage out their should be able to get a mortgage if their income multiplied by 4.5 equals the total amount they’d need to borrow. This will differ from lender to lender and be impacted by your own circumstances, but is a good guiding number. For example: A £200,000 home with £50,000 deposit means you’ll need to borrow £150,000, which means you’ll need to earn £33.3k+ a year to meet the typical affordability criteria.

Outlooks

We’ve used a selection of different data to base the forecasts on, because everyone’s got a different take on the future. For the purposes of this analysis we’ve taken data from:

  • Savills – which can be found here
  • eMoov – which can be found here
  • Forecast – This is a straightforward forecast based on the existing data.

 

What does this all mean?

Some may see the deposits quoted in coming years & begin to feel that buying a house isn’t possible – especially if you’re a first time buyer. You’d be forgiven for thinking that, the lack of housing in the UK does sometimes put the squeeze on some, however, what the figures above don’t do justice in showing is where you’re buying, the types of schemes to enable first-time-buyers to get on the ladder (i.e. help to buy), nor to they take into account the amount of different criteria which lenders apply. Also, the forecasts are just that, forecasts. With Brexit nearing closer and a feeling of uncertainty, these could quite easily be thrown out – meaning that no one can say for certain.