Affordability pressures are showing signs of easing, according to Halifax, with strong wage growth and modest house price inflation helping buyers’ incomes stretch further.
The average house price to earnings ratio has fallen to 6.55, the bank said, down from 6.62 last year, and well below its record high of 7.24 in the summer of 2022. This ratio is calculated by dividing house prices by earnings, so the higher it is, the less affordable it is for people to buy a property.
Pay has increased by 5% over the last year, compared to a modest 3.8% rise in house prices. New mortgage costs have fallen by around 9% over the last year, Halifax’s research shows, from £1,116 to £1,060. These factors combine mean that mortgage costs as a percentage of income have dropped to 29% from 33% over the same period, its lowest level for two years.
The average property price in the UK currently stands at £292,508, whilst average annual earnings are now at £44,667, giving the current 6.55 house price to income ratio.
Amanda Bryden, Head of Halifax Mortgages, said: "Housing affordability has improved over the past year, thanks to stabilising property prices, strong wage growth, and easing interest rates. That’s great news for first-time buyers and existing homeowners looking to remortgage or move up the property ladder.
“However, while homes are becoming more affordable, the progress has been gradual. Buying a property remains a significant challenge for many, with prices still near record highs and interest rates likely to stay higher than we’ve been used to over the past decade.”
Least and most affordable places to buy
Elmbridge in Surrey is the least affordable area to buy a home in the UK, according to Halifax, with a house price to earnings ratio of 17.54. However, this is a significant improvement from the 19.46 ratio seen in this area last year. The other least affordable areas to buy a home are St Albans in Hertfordshire with a ratio of 13.96, narrowly beating Kensington & Chelsea in London with a 13.93 house price to earnings ratio.
The most affordable places to buy a home are in the north of England. Kingston upon Hull in East Yorkshire takes the top spot, with a house price to earnings ratio of 3.15, followed by Burnley and Blackpool in the North West, with ratios of 3.20 and 3.34 respectively.
Amanda Bryden, Head of Halifax Mortgages, said: “While national house price figures often grab the headlines, it’s crucial to remember that the property market varies significantly at a local level. The most sought-after areas tend to have the highest prices, and local developments, such as improved transport links or job opportunities, can all help to drive demand.”
