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Our latest research highlights the detrimental impact the 1% annual pay cap has had on public sector employees where their property purchase potential is concerned.

We looked at the annual average wage for the public sector since the 1% annual pay cap was implemented in 2012 and what that meant in terms of the price of property available with the mortgage approval at 4.5 times that wage (including a 10% deposit).

We then compared this to the average house price at the time and the difference between the two, as well as how this gap has widened since. Finally, with the 1% cap intended to stay in place until 2020, we looked at how much further this gap could widen in three years’ time.

Since 2012, the average UK house price has increased by more than £50,000, up 31.12%. However, in the same time, a 1% cap on public sector wages means that they have grown by just 6.03%.

What this means is that as a typical salary multiple for a mortgage, the average public sector worker can afford a home that is significantly inferior to the home they could have afforded five years ago, due to the double whammy of house price inflation going against them and their static purchasing power where mortgages are concerned.

Average House Price Growth

%

2012-2017

Public Sector Wage Growth

%

2012-2017

In 2012, the average house price was £167,854, but the average public sector salary was just £25,060. With a mortgage lender typically lending 4.5 times this wage and a 10% deposit of £16,785, a public sector employee could only afford to buy a property at a value of £129,556 – a difference of 29.56% between that and the average house price.

Gap Between Public Sector Property Affordability and the Average House Price

  • 2012 29.56%
  • 2013 29.59%
  • 2014 37.2%
  • 2015 41.61%
  • 2016 49.45%
  • 2017 55.46%
  • 2020 75.37%

Since then the gap has continued to widen, increasing by 29.59% in 2013, 37.27% in 2014, 41.61% in 2015 and 49.45% in 2016. So far 2017 has seen the largest gap emerge at 55.46% with the average house price topping £220,094, yet the average public sector wage has continued to stagnate at £26,571. As a result, a public sector employee today can only secure a mortgage for a property valued at £141,579 when including the 10% deposit of £22,009.

House Price Graph

Based on the last three years of both house price and public sector wage growth the forecast for 2020, the proposed year for the 1% cap to run to, looks even bleaker. By then the average house price could be in the region of £263,940 with the public sector wage reaching just £27,581. If this were the case, then public sector employees would only be able to secure a mortgage on a property to the value of £150,507 with a 10% deposit of £26,394, stretching the gap to an eye-watering 75.37%.

The plight of today’s aspirational homeowner is a well-documented one, but it isn’t just a matter of age, and the year you were born, the sector in which you choose to build a career can also have huge implications on your chances of getting on the ladder.It is very disappointing that those

It is very disappointing that those arguably the most deserving of a foot up on the ladder are the ones left well off the pace. If the cap were to remain in place until 2020, the difference between salary, the amount of mortgage available and the average house price will be cavernous for those in the public sector.

Russell Quirk

Founder & CEO, eMoov.co.uk