First Time Buyers Need Over 90% of Years Salary For Deposit

Rising house prices have seen affordability levels in the U.K. deteriorate to almost record levels during 2007, according to the Royal Institution of Chartered surveyors.The cost of buying a home in the U.K. has risen 8.4% in the year to the second quarter of this year and is now 350% more expensive than the most affordable point in 1996.

"First-time buyers are facing an enormous struggle to access the housing market," said RICS senior economist David Stubbs. "This may worsen if the turmoil in the U.S. market forces mortgage providers to tighten lending criteria and demand even higher deposits."

RICS said a couple on around average earnings now needs to put 96% of their combined earnings into a savings account if they want to buy a home after 12 months. Eleven years ago, the average couple would only have to save 21% of their combined take-home pay over one year to afford to buy a home.

U.K. mortgage lender Nationwide has said the average U.K. house price has more than tripled over the last 11 years to £183,898 in August from £54,025 in August 1996. Furthermore, once today's couple has bought their new home they would have to spend an average of 44% of their total take home pay to service their mortgage and pay the interest off, that is only 4% below the record 48% seen in the first quarter of 1990. RICS said this level would rise further as the full effect of the Bank of England's recent interest rate rises has yet to feed through to mortgage interest repayments.

RICS said London remains the most expensive place to own a home, with first-time buyers having to spend 51% of their after-tax income on mortgage payments compared with just 33% in the northern regions such as Yorkshire and Humberside.