According to the National Building Society, it’s now more affordable to enter the property market than in 2022, with property prices slightly below peak levels from summer 2022. Average incomes have increased over 15%, reducing the cost of homeownership relative to wages. First-time buyers now spend five times their gross income on homes, down from 5.8 times. Despite this slight improvement, monthly mortgage payments for typical buyers are around 36% of take-home pay, exceeding the long-term average of 30%. Many first-time buyers struggle to save for deposits, leading to increased reliance on family support.
It’s more affordable to get on the property ladder now than it was in 2022, according to the National Building Society’s latest figures.
Average property prices remain slightly below the all-time high set in summer 2022, according to Nationwide.
But Nationwide’s analysis of Office for National Statistics data shows average incomes have increased by more than 15% since then, meaning the cost of buying a home has fallen in proportion to people’s wages. I am doing it.
The typical first-time buyer is now buying a home worth five times their gross annual income, down from 5.8 times their highest annual income from April to June 2022.
However, real estate is still selling at much more affordable prices than in past decades.
The long-term average ratio of home prices to earnings is 3.9 times.
Moderate improvement: Affordability has improved compared to 2022, but first-time buyers are still paying a higher multiple of their income than in the past.
Higher: A typical first-time buyer with a 20% down payment will have a monthly mortgage payment equal to 36% of their take-home pay. This is above the long-term average of 30%.
The main hurdle for most first-time buyers is collecting the earnest money deposit. While some people receive help from family members, many face the challenge of taking years to save.
Record rent increases and inflation in recent years have made this even more difficult for some.
While wages have outpaced house prices for the past two-and-a-half years, the mortgage landscape has also changed, with monthly payments increasing.
If a borrower wants to lower their monthly payments, they should save up a larger down payment, take longer or buy a less expensive home.
According to Moneyfacts, the average interest rate for a two-year fixed-rate mortgage in April 2022 was 2.86% and is now 5.51%.
If you pay off a £200,000 mortgage over 25 years, that’s the difference between paying £934 a month and £1,229 a month.
“Housing affordability improved slightly last year as earnings growth slightly outpaced house price growth and average borrowing costs fell slightly,” said Andrew Harvey, senior economist at Nationwide. Ta.
Nevertheless, housing affordability remains above historical norms.
“For a prospective buyer on an average income and purchasing a typical first-time buyer property with a 20% down payment, the monthly mortgage payment would be 36% of the take-home pay, compared to the long-term average of 30%. percentage.
“It’s no surprise that a significant proportion of first-time buyers must enlist the help of friends and family to collect their deposit.
“From 2023 to 2024, approximately 40% of first-time buyers received some kind of assistance in raising their down payment, whether it was in the form of a gift from family or friends, a loan, or an inheritance.”
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Where are the cheapest housing prices?
House price returns across the UK are broadly similar to last year, with London continuing to have the highest house price return at 8.0 and Scotland the lowest at 3.0.
Since summer 2016, average property prices in London have increased by just 9%, from £475,000 to £519,000 in November 2024.
During this period, prices for apartments and maisonettes in the Tokyo metropolitan area have increased by only 3% on average.
Kensington and Chelsea has the lowest housing prices in the country, with the average house price being 13.6 times the median income.
Chichester, West Sussex is the most affordable area in the Outer South East, with house prices averaging 8.5 times the average income.
Meanwhile, in the Outer Metropolitan Region, Hertfordshire’s Three Rivers, which includes the popular commuter town of Rickmansworth, is the cheapest local authority.
Somerset is the cheapest region in the South West, Bath and North East.
The same is true in Cambridge, where average first-time buyer prices are much higher than in parts of East Anglia.
York is also a popular city, but with a house price return of 6.3 it is not the most affordable location in Yorkshire and the Humber.
Wychavon in Worcestershire is the most affordable area in the West Midlands and includes parts of Evesham, Droitwich Spa and the Cotswolds.
Meanwhile, in the East Midlands, the Derbyshire Dales is one of the most expensive areas, with much of it located within the Peak District National Park, including towns such as Matlock, Ashbourne and Bakewell. There is.
Westmorland and Furness, a large part of the Lake District National Park, is the least expensive area in the north.
In Wales and Scotland, the capital cities have the lowest house prices, with Cardiff and Edinburgh having first-time buyer price return ratios of 5.6 and 5.4 respectively.
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Most affordable local area
Aberdeen is the most affordable borough in the UK, with the average price for first-time buyers being just 2.5 times the average return for the area.
Burnley and Hartlepool are the most affordable areas in the North West and North regions respectively, with both having a house price return ratio of 2.8.
North East Lincolnshire, including the seaside towns of Grimsby and Cleethorpes, is Yorkshire and the Humber’s most affordable local authority.
Further down the east coast, Great Yarmouth in Norfolk has the lowest ratio in East Anglia and is also the cheapest area in the region.
Further south, Tendring in 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 return of 5.3.
Meanwhile, in the Outer Metropolitan region, Surrey Heath, which includes Camberley and Bagshot, is relatively profitable and the most affordable.
Enfield is London’s most affordable borough, but with a house price return ratio of 6.2, it is still higher than most local authorities nationally.
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