Generation rent: London will need more than a 95% mortgage.

Rishi Sunak’s promise to the young generation of Britain seems challenging to fulfill.

Rishi Sunak has promised to convert ‘generation rent to generation buy’ in his latest budget announcement with a 95 percent return on mortgages, previously phased out after the 2008 financial crisis.

The ‘generation rent’ refers to people between the ages of 18 and 40 who have effectively been excluded from the housing market due to skyrocketing house prices, low wage growth, and a high cost of housing lifetime. While the government’s 95 percent mortgage is meant to make deposits less expensive, it doesn’t consider the other financial hurdles that keep this generation from accessing the property ladder.

Despite the economic instability brought on by the Covid-19 pandemic, UK house prices have risen 8.7 percent in the last year (February 2020 to February 2021) and 188 percent over the past two decades, bringing the median property price in London to £ 672,051.

Unfortunately, this massive increase in home prices has not been accompanied by an increase in wages. Currently, the median salary for those under 30 is £ 25,980, which is just a 67% increase over the past 20 years. Coupled with the high cost of living, the average rent in the UK is £ 832.25 a month, which means that millennials are paying almost half their wages in rent.

Rishi Sunak seeks to support the UK’s young generation.

Even if young people can save enough to buy their own home, they face more challenges once they have bought it. Research from Quotezone.co.uk found that 20-35-year-olds in London pay 17.09 percent more than older generations regarding home insurance. The data showed that this age group paid, on average, £ 166 a year for home insurance on a three-bed property, compared to the 65 and over the group who only paid £ 136.

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