In the past year there has been a modest improvement in the affordability of British housing, due to the profit growth that exceeds house price growth and a slight reduction in the average loan costs marginal.
According to the latest study of the Nationwide Housing Accessability Report, which also reveals that affordability remains stretched by historical standards.
A potential buyer who earns the average British income and buys a typical first copper ownership with a deposit of 20% would have a monthly mortgage payment that is equal to 36% of their home wage over the long-term average of 30%.
The report also shows that house prices remain high compared to the average income, with the first house price of the buyer (FTB) to the Winstratio (HPER) at 5.0 at the end of 2024, still far above the long run average from 3.9.
Consequently, the deposit nuisance remains high. This is a challenge that has been exacerbated in recent years due to the record increase in rents, which, together with the costs of life more in general, has hindered the ability of many in the private rented sector to save.
On this point, Andrew Harvey, senior economist at Nationwide, said: “It is not surprising that a considerable part of the first buyers must draw on the help of friends and family to increase a deposit. In 2023/24, about 40% of the first buyers had some help in increasing a down payment, either in the form of a gift or a loan from family or friends, or by an inheritance. “
Despite these affordability challenges, mortgage market activity and house prices proved surprisingly resilient in 2024. The annual house price growth ended the year at 4.7%, a clear improvement compared to the small decreases that were seen at the beginning of 2024.
The number of mortgage inspections returned to the level of 2019, even though the typical mortgage interest rate is about three times higher. Perhaps even more remarkable, the first share of the buyers in the purchase mortgages of the house in 2024 (54%) was pre-Pandemic (51%).
Harvey added: “Looking ahead and provides the economy that is recovering steadily, as we expect, the underlying pace of the activity of the housing market will probably continue to strengthen as the affordability restrictions alleviate a combination of a modest lower interest rates and house prices profit growth . “
Nationwide also investigated how affordability varied for people in different professions. Perhaps not surprising, mortgage payments compared to take-home wages are the lowest for people in management and professional roles, where the average income is usually higher.
Director of Benham and Reeves, Marc von Grundherr, noted: “What you do for a career and where you choose to do it, the floating factors remain behind your ownership purchasing potential, but although the affordability of housing is certainly an obstacle, it is Far from deterrence, with more than a million home buyers who make their move last year alone.
“This is despite the fact that the buyers of today are fighting with much higher mortgage interest rate than they have become used to in recent years and, in the hope that the costs of borrowing will alleviate in 2025, we expect that home ownership is very focused on the nation remains. “
Hargreaves Lansdown Head of Personal Finance Sarah Coles saw little to encourage buyers every first time. “The good news is that houses are very more affordable than this time last year – the bad news is that they are so far out of reach that a slight improvement is about as useful as a 10% discount on a diamond inlaid Tiara. And it is not only first buyers who are confronted with a nightmare of a real estate. It is also a huge headache for the elderly. “
Yopa Chief Executive Verona Frankish took a similar line: “Affordability of the housing market remains an important problem for many and although we may see more existing buyers make their efforts, the number of first copper transactions in England has fallen by 43% on an annual basis, because because They have difficulty overcoming the high costs of getting that first foot on the real estate ladder. “
Frankish added: “Although there are a number of arrangements aimed at helping first buyers on the ladder, we must see that the government will make its promises to build more houses if meaningful progress has to be made with regard to the Tackling the affordability of homes all over the country. “