House prices at their most affordable since 2015 compared to salaries
House prices have become more affordable relative to salaries for the first time since 2015, according to data from Lloyds Banking Group. The average home now costs 7.3 times annual household income, down from 7.6 a year ago, with sluggish house price growth of just 0.5 per cent offset by wage increases of 4.5 per cent. This improvement matters because the affordability gap has been a significant barrier for would-be homebuyers, particularly first-time purchasers.
First-time buyers have benefited most from the narrowing gap, with homes now costing 5.9 times earnings compared to 6.1 previously. Substantial regional disparities remain: Scotland and northern England offer the most affordable options, with Inverclyde and Aberdeen averaging just 3.5 times annual earnings, whilst Elmbridge in Surrey remains the least affordable at 17.4 times earnings. However, the gains are being undermined by higher mortgage rates, with average monthly repayments rising from £1,100 to £1,157, meaning affordability remains stretched for many prospective homeowners.
- House prices reach lowest affordability ratio relative to salaries since 2015
- First-time buyers see improvements, with homes now costing 5.9 times earnings
- Regional disparities persist, with Scotland far more affordable than the south-east
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For many Britons, buying a home has become increasingly difficult. A common way to measure this is to compare house prices to annual earnings: when prices grow faster than wages, the gap widens and homes become less affordable. This has been happening for years, making home ownership feel out of reach for many, especially first-time buyers.
Recently, this trend has begun to reverse. Wages have been growing faster than house prices, slowly closing the gap between what people earn and what homes cost. Data from Lloyds Banking Group shows that homes now cost 7.3 times average household income, compared to 7.6 times a year ago, the most affordable the market has been since 2015.
Yet the picture remains mixed for those hoping to buy. Rising mortgage rates have increased monthly repayments, offsetting some gains from improved affordability. Additionally, significant regional differences exist, with homes far more affordable in Scotland and northern England than in parts of the south-east, where prices remain exceptionally high relative to local salaries.