Despite recent inflation, buying a home today remains more affordable as a percentage of take-home pay compared to 35 years ago. The average value of a first-time buyer property in Lancaster has risen by 401.5% since 1989, reaching £168,800 in 2024. Yet, what truly matters is the monthly cost relative to one’s salary.
According to the Nationwide Building Society, today’s first-time buyers in Lancaster spend 28.6% of their household take-home pay on mortgage payments, compared to 33.0% in 1989. This 13.3% reduction in financial burden is significant, considering wages were lower and the Bank of England’s base rate was 14.88% in 1989.
Looking at a more recent comparison from 2007, first-time buyers allocated 37.9% of their household income to mortgage payments, which is 24.5% higher than today. This underscores the improved property affordability in Lancaster over recent decades.
Several factors contribute to this trend. Real incomes (after inflation) have increased by 25.02% over the last 35 years, and interest rates are much lower, currently at 5.25%. Additionally, government policies and mortgage availability have played crucial roles. Programs like Help to Buy and favorable mortgage products have reduced financial barriers for first-time buyers. Competitive mortgage products with lower interest rates and longer repayment terms have also eased the burden.
Demographic changes and urban development have further influenced the housing market. Lancaster’s strategic location and improved transport links have made it an attractive option for commuters and young families, increasing demand and driving development projects that offer affordable housing options.
The economic advantage of buying over renting in Lancaster is also notable. Rising rental prices offer no long-term financial security, while a fixed-rate mortgage provides predictability in monthly payments and potential property value appreciation. Although large deposits can be a hurdle, with the average first-time buyer deposit in 2023 at £8,440 for Lancaster first-time buyers, ( 95% of mortgages requiring only a 5% deposit have been available for over 14 years and are relatively accessible with a decent credit history. Extending the mortgage term can further reduce monthly payments.
Homeowners build equity, a significant financial asset over time, unlike renters who gain no ownership benefits. If you don’t buy a home, once you retire and have no significant assets, government support for rental payments will likely cover only a smaller home, necessitating a move or supplementing rent from personal funds.
Final Thoughts
The Lancaster property market has shifted significantly in terms of affordability for first-time buyers over the past 35 years. While property prices have increased, the proportion of household income required for mortgage payments has decreased due to lower interest rates, real-term income growth, and supportive government policies. This improved affordability, combined with rising rent costs, makes buying a more attractive and financially sound option for many.
The economic landscape now favours first-time buyers in ways that were not possible in 1989 or even 2007.
As the market continues to evolve, first-time buyers in Lancaster can take advantage of the current conditions to secure their financial future through homeownership. The reduced financial burden and potential for long-term gains make now an opportune time to step onto the property ladder.
What are your thoughts? What was it like when you your bought first home? What did you have to sacrifice in order to do so? I would love to know!
My name is Michelle Gallagher. You can email me at michelle@jdg.co.uk or call me on 01524 843322
Thanks for reading
Michelle