Investment bank associates can't even buy "mid tier houses" in London. This is why

Banking was one of the most lucrative careers for young people to break into in previous decades, but the purchasing power of young bankers has significantly declined as costs have risen. This appears to be hitting them hardest when it comes to building wealth through the housing market.

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Calculations from Mike Bell, head of market strategy at Bluebay Asset Management, show that the purchasing power of dual income couples, each earning £100k, has fallen significantly since 2021. 

Bell looked at income after tax and mortgage payments, for a couple on a combined salary of £200k who bought a £1.2m house in 2021, versus a couple buying the same house today on an inflation-adjusted income of £252k. 

He found that, if the couples had an interest only mortgage, their yearly spending on mortgage payments would have increased by over £30k. If they had a repayment mortgage, their yearly mortgage spending would have increased by £20k. This took its toll on post-mortgage income, which was down 28% and 20% respectively in real terms. 

Source: Mike Bell

In banking, this has been compounded by squeezed pay. Prior to the financial crisis, top banking associates were globally earning the equivalent to $450k+ (£336k). Today, data from our compensation and bonus report suggests that the average associate at a tier one investment bank earns closer to $200k (£149.5k) globally. 

Lacklustre bonuses are a factor; one junior banker at Morgan Stanley in London told us last year that analysts received 15-30% of their salary as a bonus, compared to 95-100% of salaries in 2021.

House prices in London, meanwhile, have soared. The average price of a terraced house is £3m in zone one, £1.6m in zone two and £1.1m in zone three. Artem Ponomarev, a fintech founder in London, tweeted in July that his friend working as an IB associate could not even afford a "mid tier house" in London. 

Renting isn't exactly affordable either. One WallStreetOasis user complained last year that a one bedroom flat in Aldgate which cost £1.6k in 2021 now costs £3.5k. If the couple on £252k were to stay there while saving up money for a deposit, they'd have more than 20% less income in real terms to save towards that house. This is not including changes to service charges and council tax. 

Some bankers are spending less. A diary from Irish publication The Journal last November showed that a 24-year-old banker living in London said he was spending £1,250 per month on rent for a flat 30 minutes away from the office.

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