Buying a home in the UK has become slightly more affordable this year, as average wages have outpaced house prices and mortgage costs, according to the country’s largest mortgage lender, Halifax.
Halifax, part of Lloyds Banking Group, revealed that in the third quarter of 2024, the average UK house cost 6.55 times the mean annual full-time income.
This marks an improvement from 6.62 times in 2023 and a record peak of 7.24 in mid-2022.
Mortgage affordability has also seen progress. The cost of servicing a new mortgage has fallen to 29% of average income, the lowest in over two years, down from 33% a year ago.
These figures are based on a mortgage with a 30-year term, a five-year fixed interest rate, and a 25% deposit.
“While homes are becoming more affordable, the progress has been gradual,” said Amanda Bryden, Head of Mortgages at Halifax.
“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.”
The Bank of England raised interest rates to a 15-year high of 5.25% in August 2023 before initiating cuts this year, with rates now standing at 4.75%.
Economists expect further reductions, predicting rates will fall to 3.75% by the end of 2025. Despite these changes, house prices are forecast to rise, with projections of a 3.1% increase in 2025 and 4% in 2026.
Halifax reported that the average house price in Q3 2024 was £292,508, largely unchanged over the past two years. However, housing affordability varies significantly across the UK.
The southeast of England and London remain the least affordable regions, where new mortgages consume 39% and 36% of local salaries, respectively.
In contrast, the northeast of England offers the most affordable housing, with mortgages costing 19% of local earnings. Scotland and Northern Ireland follow closely, at 22%.
The gradual improvement in affordability comes as a welcome development, but with prices still elevated, many prospective buyers face continued challenges in entering the housing market.
