Buying in London. How much home can I afford?

Nov 15, 2021
How Much House Can I Afford UK Buyers Guide

London continues to be one of the most in-demand locations to live in the UK. As well as a thriving job market, the capital offers incredible cultural, retail and culinary scenes to suit all tastes. So, naturally, property prices reflect London's popularity.

According to a recent Evening Standard article, prices in London rose by 0.8% between September 2020 and September 2021.

From February 2020 to February 2021, the average deposit put down by first time buyers in Greater London averaged £132,685, according to Halifax research reported in City A.M.

This means that, in such a sought-after region, it's important that you have a good handle on your finances and understand what you can do to maximise your options in London's property market.

How much mortgage can I get?

Nothing is set in stone, but in general banks will let you borrow up to 4.5 times your total annual income. So if you bring in £30,000 a year, you might be able to borrow up to £135,000. If you’re buying with someone else on the same income, that figure could leap up to £270,000.

Lots of websites like comparethemarket, MoneySupermarket and MoneySavingExpert have handy mortgage calculators which can help you work out what out what levelof mortgage might be within your reach. You may want to consider getting expert help from a regulated mortgage adviser too.

It’s also good to ask yourself ‘how much mortgage I can afford?’, remembering to factor in all the other costs you’ll need to cover each month, like travel, food, council tax and energy bills.

Is there help for home buyers in London?

The good news is that there most definitely is. Probably the highest profile is the Government-backed Help to Buy scheme, available for first-time buyers on new-build homes up to £600,000. The scheme allows you to borrow 40% of the property value with a 5-year interest-free Government loan.

By securing a 55% mortgage, you then only need to find a 5% deposit to make your move (subject to eligibility, terms and conditions).

Find out more about Help to Buy >

Help to Buy isn’t the only option available, though. In the Chancellor’s 2021 spring budget, the Government announced the introduction of Deposit Unlock – a new mortgage scheme that will run until December 2022, designed to increase the number of competitively priced mortgages available to first time buyers and existing homeowners who have a smaller deposit or limited equity.

At its simplest, Deposit Unlock means that if you have a deposit of 5% you could get a mortgage for 95% of the property’s value. The scheme is exclusively available on newly built homes up to £600,000.

For buyers, a 95% mortgage under Deposit Unlock will work like a standard mortgage. But for the lender, if they lose money, the Government will cover some of the costs – which means banks will be more likely to lend money.

Find out more about Deposit Unlock >

And that’s not all. If you’ve saved up a deposit of 10%, Barratt London offers a product called Deposit Boost. It does exactly what it says on the tin – boosting your deposit with an extra 5% of the sale price so you end up with a 15% deposit. That means you need to borrow less from a lender and could possibly secure a more competitive mortgage rate.

Find out more about Deposit Boost >

Are there different ways to buy in London?

You might think that buying a place of your own in London is out of your reach. But you could be surprised where a bit of creative thinking can get you.

Some people are putting more properties on their radar by choosing to buy with friends or family members. There are also shared equity schemes out there. In these you typically buy a share of between 25% and 75% in a property and a commercial partner like a housing association owns the rest. You still need to put down a 5% deposit, but that’s calculated only on your share rather than the full property price.

Where are the best places to buy in London?

There are lots of factors that will affect what kind of home you can afford with the budget you have to work with. But it goes without saying that location is (and always will be) one of the biggest influences.

While the leafy streets of Kensington and Chelsea may be beyond most of us, London is constantly evolving and there are plenty of up-and-coming areas, as well as perennial favourites to explore.

In the past few years, and particularly since the 2012 Olympics, east London has seen a remarkable transformation, with vibrant neighbourhoods and communities springing up that are both fashionable and affordable. And across the whole north, west and south of the city, there are many exciting new developments in places like Acton, Hendon, Tooting and Harrow that are reimagining the whole concept of contemporary urban living.

All of which means that when people ask, ‘how much house/apartment can I afford’, the answer might be ‘more than you think’.

Where can I find out more about buying a new London home?

Having practical home buying information at your fingertips is crucial. You can find out about your options by visiting our website.

Check out The Steps to Buying a New Home >

Barratt London is here to help build your future with a wide range of brand-new apartments to suit all needs. Start your search here.

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