Home Money Getting on the property ladder more affordable than in 2022

Getting on the property ladder more affordable than in 2022

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Modest improvement: Affordability has improved compared to 2022, although first-time buyers are still paying a higher multiple of their income than in the past

According to the latest figures from Nationwide Building Society Building Society Building Society Building Society Building Society Building Society Building Society, climbing the property ladder that in 2022.

Average property prices remain just below the all-time high recorded in summer 2022, according to Nationwide.

But average earnings have risen by more than 15 per cent since then, according to analysis by the Nationwide Bureau of National Statistics Data, meaning buying a home costs less in proportion to people’s wages.

The typical first-time buyer now purchases a home worth five times their gross annual salary, down from a maximum of 5.8 times annual income between April and June 2022.

However, property remains much less affordable than in past decades.

The long-term average ratio for house prices to earnings is 3.9 times.

Modest improvement: Affordability has improved compared to 2022, although first-time buyers are still paying a higher multiple of their income than in the past

The main hurdle for most first-time buyers is raising a deposit. While some may be able to get help from family, many are left with the challenge of saving, which can take years.

This has been made more difficult for some by record rent increases in recent years, as well as inflation.

And while wages have outpaced house prices over the past two and a half years, the mortgage landscape has also changed, meaning monthly repayments have increased.

If borrowers want lower monthly payments, they will need to save a larger deposit, which will take longer or buy a cheaper home.

In April 2022, the average two-year fixed-rate mortgage was 2.86 percent, according to MoneyFacts, while today it is 5.51 percent.

On a £200,000 mortgage repaid over 25 years, that’s the difference between paying £934 and £1,229 a month.

Higher: A typical first-time buyer with a 20% deposit would have a monthly mortgage payment equal to 36% of their take-home salary, above the long-term average of 30%

Higher: A typical first-time buyer with a 20% deposit would have a monthly mortgage payment equal to 36% of their take-home salary, above the long-term average of 30%

Andrew Harvey, senior economist at Nationwide, said: “There has been a modest improvement in housing affordability over the last year, due to earnings growth marginally outpacing house price growth and a slight reduction in costs. loan average.

‘However, housing affordability remains stretched by historical standards.

‘A prospective buyer earning the average income and purchasing a typical first-time buyer property with a 20 per cent deposit would have a monthly mortgage payment equal to 36 per cent of their takeaway payment, well above average long-term 30 percent.

‘It is not surprising that a significant proportion of first-time buyers have to turn to the help of friends and family to raise a deposit.

“In 2023-24, around 40 per cent of first-time buyers had help raising a deposit, either in the form of a gift or loan from family or friends, or through an inheritance.”

Where are the least affordable homes?

House price to earnings ratios remain broadly similar to a year ago across the UK, with London continuing to have the highest house price to house price at 8.0 and Scotland the lowest at 3.0.

Since summer 2016, the average London property has only increased by 9 per cent from £475,000 to £519,000 as of November 2024.

Flats and Maisonettes in the capital have only risen 3 per cent on average over that time.

Kensington and Chelsea are the least affordable local authority in the country, with the average household making up 13.6 times the average income.

Chichester in West Sussex is the least affordable area in the outer South East region, with house prices 8.5 times average earnings.

Meanwhile, in the outer metropolitan region, Three Rivers in Hertfordshire, which includes the popular commuter town of Rickmansworth, is the least affordable local authority.

In the south west, Bath and north east Somerset is the least affordable area.

It’s a similar story in Cambridge, where average first-time buyer prices are much higher than parts of East Anglia.

York is another sought-after city, but with a house price-to-earnings ratio of 6.3, it is the least affordable location within Yorkshire and the Humber.

Wychavon in Worcestershire, is the least affordable part of the West Midlands and includes Evesham, Droitwich Spa and parts of the Cotswolds.

Meanwhile, in the East Midlands, the Derbyshire Dales is one of the highest priced areas, with much of it in the Peak District National Park, including towns such as Matlock, Ashbourne and Bakewell.

Westmorland and Furness, which hosts significant swaths of the Lake District National Park, is the least affordable area in the north.

In Wales and Scotland, the capital cities are the least affordable places, with Cardiff and Edinburgh having first-time buyer home price-to-earnings ratios of 5.6 and 5.4 respectively.

The most affordable local areas

Aberdeen is the most affordable authority in the UK, with average first-time buyer prices just 2.5 times average earnings in the area.

Burnley and Hartlepool are the most affordable areas in the North West and Northern regions respectively, with both house price to earnings ratios of 2.8.

North East Lincolnshire, which includes the coastal towns Grimsby and Cleethorpes, is the most affordable local authority in Yorkshire and the Humber.

Further down the east coast, Great Yarmouth in Norfolk has the lowest ratio in East Anglia and is also the lowest priced area in the region.

Continuing south, trending into Essex, which includes Clacton-on-Sea and Harwich, is the most affordable area in the outer south-east.

Swindon is the most affordable town in the South West, with a house price to earnings ratio of 5.3.

Meanwhile, in the outer metropolitan region, Surrey Heath, which includes Camberley and BagShot, is the most affordable area, due to relatively high earnings.

Enfield is the most affordable London borough, although its house price earnings ratio of 6.2 is still higher than most local authorities across the country.

How to find a new mortgage

Borrowers who need a mortgage because their current fixed-rate arrangement is ending, or they are buying a home, should explore their options as soon as possible.

Quick Mortgage Finder links to this is Money L&C partner

> Mortgage rate calculator

> Find the right mortgage for you

What happens if I need to turn back?

Borrowers should compare rates, talk to a mortgage broker and be prepared to take action.

Homeowners can connect to a new agreement six to nine months in advance, often with no obligation to take it.

Most mortgage agreements allow fees to be added to the loan and are only charged when it is removed. This means borrowers can lock in a rate without paying expensive arrangement fees.

Please note that by doing this and not removing the fee at completion, you will be paying interest on the fee amount for the entire term of the loan, so this may not be the best option for everyone.

What happens if I am buying a house?

Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.

Buyers should avoid over-stretching and keep in mind that home prices may fall as higher mortgage rates limit people’s borrowing capacity and purchasing power.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is that Money has a long-standing partnership with Broker L&C with no fees, to provide you with expert mortgage advice with no fees.

Interested in seeing today’s best mortgage rates? Wear This is Money and L&CS Mortgage Rate Calculator To show deals that match your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s online mortgage finder? It will search 1,000’s of offers from over 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with this is money and L&C

However, please note that rates can change quickly, so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.

Mortgage service provided by Mortgagas of London and Country (L&C), which is authorized and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most buy-to-let mortgages. Your home or property can be repossessed if you don’t keep up repayments on your mortgage

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