The proportion of local authorities in the UK where housing is affordable for an FTB has more than trebled since 2007. In the first quarter of 2009, the average price paid by an FTB was affordable for someone on average earnings in 21% of local authorities; compared to just 6% in 2007 Quarter three.
The house price to earnings ratio - a key affordability measure - is lower now than it has been for more than six years. Further, the house price to average earnings ratio has declined from a peak of 5.84 in July 2007 to an estimated 4.34 in March 2009 - a fall of 26%. The proportion of disposable earnings devoted to mortgage payments - another affordability measure that includes the impact of interest rate changes - has also fallen significantly due to the combination of the decline in house prices and the cut in interest rates to record lows (from a peak of 48% in 2007 to 31% in 2009 Quarter one).
Martin Ellis, housing economist at Halifax, commented: "There has been a marked improvement in housing affordability for potential first-time buyers in many parts of the UK over the past 18 months. This trend continued in the first three months of 2009. The significant reductions in house prices, relative to average earnings, has resulted largely from the decline in house prices since the autumn of 2007. As a result, housing is at its most affordable, on this key measure, for more than six years."
