But affordability remains stretched above historic norms
Housing affordability in the UK has slightly improved over the past year, though affordability remains significantly stretched compared to historical norms, according to a new report from Nationwide.
“There has been a modest improvement in UK housing affordability over the last year, due to earnings growth marginally outpacing house price growth and a slight reduction in average borrowing costs,” said Andrew Harvey (pictured), senior economist at Nationwide Building Society.
The report highlights that a typical first-time buyer, purchasing a property with a 20% deposit, would need to allocate 36% of their take-home pay toward mortgage payments. This figure is well above the long-term average of 30%.
The first-time buyer house price-to-earnings ratio (HPER) stood at 5.0 at the end of 2024, compared to a long-term average of 3.9. Harvey explained that rising rents and the broader cost-of-living crisis have made it harder for private renters to save for a deposit. Forty percent of first-time buyers in 2023/24 relied on financial help from friends or family to secure a deposit.
Despite these challenges, the housing market demonstrated resilience in 2024. Annual house price growth reached 4.7% by year end, and mortgage approvals returned to 2019 levels, even though typical mortgage rates were around three times higher. First-time buyers accounted for 54% of house purchase mortgages, up from 51% pre-pandemic.
Looking ahead, Harvey noted that affordability pressures could ease gradually.
“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,” he said.
Nationwide’s report also examined how affordability differs by occupation and region. Workers in managerial and professional roles face the lowest mortgage payment burdens relative to income, while those in elementary occupations — such as cleaners, labourers, and couriers — see mortgage payments consume over 50% of take-home pay.
Regional disparities remain significant. London saw the most substantial improvement in affordability in 2024, owing to relatively weak house price growth, but it remains the least affordable region with an HPER of 8.0. By contrast, Scotland remains the most affordable region with an HPER of 3.0.
“Affordability pressures continue to be more pronounced in the South of England and East Anglia, while in the northern regions of England and Scotland, mortgage payments as a share of take-home pay are much closer to their long-run average,” Harvey said.
At the local authority level, affordability varies widely. Kensington and Chelsea remains the least affordable area in Britain, with an HPER of 13.6, while Aberdeen is the most affordable, with an HPER of just 2.5.
Other affordability hotspots include Chichester in the South East (HPER of 8.5), Bath and North East Somerset in the South West, and Cambridge in East Anglia. In Wales and Scotland, Cardiff and Edinburgh are the least affordable cities, with HPERs of 5.6 and 5.4, respectively.
Burnley, Hartlepool, and North East Lincolnshire are among the most affordable areas, with HPERs below 3.0. Swindon emerged as the most affordable location in the South West, while Enfield, with an HPER of 6.2, was the most affordable London borough.
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