Millennials Pay 14 Times More Than Baby Boomers Did For Their First Home
24 Feb 2020
Approx Reading time: 3 minutes
- Home prices have increased by 14 times but wages have increased by only 7 times since the late 70s.
- The average boomer during the 70s only had to pay 4 times their annual paycheck to buy a home, while the average millennials have to pay 8 times their annual paycheck to do the same.
- The financial crisis of the late 2000s seems to have catalyzed the increase in the gap between average home prices and average wages.
According to experts, property prices in the UK have increased by more than two times the increase in wages, on average, in the last 40 years. Experts have also highlighted the fact that millennials have to pay a price to buy a home that is more than 14 times higher compared to the price paid by baby boomers for the purchase of their first homes during the late 70s. However, since that time, the average wage being earned by Britons has only increased by half the rate of increase in home prices, rising by only around 7 times since the year 1979. According to figures, the average price of a home back in 1979 stood at £16,800 and the average paycheck earned by Britons was £4,200 a year. Baby boomers in their 20s at that time only had to save four times their annual paycheck to afford a home. However, millennials who are at an average age of 33 years old have to save eight times their average paycheck to buy a home, which shows that the home affordability gap has doubled within the past four decades. Property prices, on average, stood at £235,000 in 2019, as per data reported by the Land Registry, while the average yearly paycheck during the same time was £29,000 as per the Office of National Statistics. Experts believe that the financial crisis of the late 2000s may be blamed for the income crunch faced by the average Briton, and younger workers have been hit the worst. However, the housing market has not responded in a similar manner, and home prices have consistently increased over time. The housing market became more active
during 2019, and reports have indicated that homeownership is on the rise among younger people. However, the rate of homeownership is still showing a downward trend, as witnessed throughout the past decade. The average homebuyer is also subscribing to larger amounts of debt compared to the previous generation, and many have been pushed to buy a home because interest rates are at historically low levels. The analysis has been released by Mojo Mortgages after taking into consideration the spending habits, outstanding debt obligations, and deposits of both the generations to highlight the fact that subscribing to a mortgage has become more difficult over time. According to a tool that has been launched by the broker to evaluate creditworthiness, while the average buyer during the 70s would be able to score 808 points out of a possible 1000, the average score in the 2000s would have fallen to 508, while in 2019 the average score would have been 410. The falling score is further evidence of the increasing financial burden on the average Briton over the years.