Latest research from the Nationwide Housing Affordability report suggests good news – although borrowers are still stretched.
According to the latest research from the Nationwide Housing Affordability Report, there has been a modest improvement in UK housing affordability over the past year. This is due to earnings growth marginally outpacing house price growth and a minor reduction in average borrowing costs.
Affordability still stretched
However, the report also states that affordability remains stretched by historical standards, with the first-time buyer house price-to-earnings ratio standing at 5.0 at the end of 2024 – still far above the long-run average of 3.9.
To illustrate, this means a prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%.
‘It’s not surprising that a significant proportion of first-time buyers have to draw on help from friends and family to raise a deposit,’ says senior economist, Andrew Harvey.
Housing market set to strengthen
Despite these challenges, mortgage market activity and house prices remained resilient throughout 2024, with the number of mortgage approvals returning to 2019 levels – despite typical mortgage rates currently being around three times higher. And first-time buyers’ share of the mortgage market was higher in 2024 than it was pre-pandemic, at 54% compared to 51% in 2019.
‘Looking ahead, providing the economy recovers steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease, through a combination of modestly lower interest rates and earnings outpacing house price growth,’ adds Harvey.
If you’re hoping to get on the housing ladder this year and are concerned about affordability, remember we’re here to help you explore your options.