According to figures from the Office of National Statistics (ONS), UK wage growth beat market and economist expectations in the three months from February to April 2019. Even when taking inflation into account, the actual wage growth in that period was 1.4%, which may not sound grand, but is actually a strong set of numbers compared to previous periods., where wage growth has been largely flat. Added to this, unemployment is historically low, and remains at a rate not seen since 1974, and employment amongst women is the highest that it has ever been at 72%.
The overall message is that more people are feeling increasingly positive about their financial situation and there are signs that this might be fueling a surge in homebuying, by enabling prospective buyers to put down bigger deposits, as well as being able to handle fluctuations in mortgage rates.
Matt Hughes, the deputy head of labour market statistics at the ONS, is quoted as saying “With employment growth among women coming from full-timers, the overall gap between men and women in hours worked is now the lowest ever – women now average about three-quarters of men’s weekly hours, compared with around two-thirds 25 years ago.” This is highly encouraging for the market overall, and a major aspect driving a wave of property sales.
The need for a deposit in many house sales has always been an issue and a big factor hindering first time buyers. While many mortgage lenders will accept smaller deposits, offset by larger monthly repayments, lots of lenders prefer as much as a 20% deposit to be able to get the best deals, and that can amount to a significant sum of money. A report by the BBC shows that the cost of a 20% deposit has risen sharply in the last decade alone, from around £52,000 in 2007 to £84,000 in 2017. A comparison with the South East shows these figures to be £38,000 in 2007 and £51,000 in 20017 in the South East, while the figures for the West Midlands are £25,000 and £28,000 respectively. It is interesting to note that in several areas of the country, there has been no significant increase in the need for a deposit, and in Northern Ireland, it has actually dropped from £38,000 in 2007 to just £23,000 in 2017.
Plainly, the increases seen in many parts of the county can only be sustainable if there are customers to pay those kinds of deposits, and in order to do that, people must feel confident that they have sufficient funds to be able to be comfortable doing it. This notion, along with the data from the ONS, implies that the added spending power that the rise in wages is giving is being spent on securing a property rather than using it for everyday purchases.
If you are looking for a first time mortgage, or to secure a new mortgage deal, come and talk to us here at Grange Mortgages, and see what we can do for you.