House prices at their most affordable since 2015 compared to salaries
House prices have become more affordable in relation to salaries, data from Lloyds Banking Group shows.
The average home now costs 7.3 times the average household income, down from 7.6 a year ago, Lloyds said.
The ratio has reached its lowest level since 2015, driven by slow house price growth.
Nationally, the average property price edged up 0.5 per cent in the past year, to £299,131, while average earnings increased by 4.5 per cent to £40,790, narrowing the gap.
For first-time buyers, homes now cost less than six times earnings, falling from 6.1 to 5.9.
Conventionally unaffordable regions have seen some of the largest improvements in house price to income ratio, though London and the south-east of England remain the most expensive places to buy.
Scotland and northern England feature many of Britain’s most affordable local authorities, led by Inverclyde and Aberdeen, according to the research.
The gap between house prices and earnings has narrowed, new data shows
Where are the most affordable locations in each region?
At a local authority level, significant differences in house price affordability remain.
Many of the lowest house price to earnings ratios are found in Scotland and northern England. These are the locations where buyers are likely to get more for their money.
Inverclyde and Aberdeen in Scotland are the most affordable locations, with the average home costing 3.5 times earnings in both areas.
The next cheapest locations are Kingston upon Hull in Yorkshire and the Humber, as well as Blackpool and Dundee, where homes cost 3.6 times earnings.
| Region | Local area | Property price | Price to income ratio |
| East Midlands | Mansfield | £183,032 | 4.9 |
| Malvern Hills | £328,261 | 8.8 | |
| Eastern England | Boston and South Holland | £181,885 | 4.5 |
| St Albans | £568,940 | 14.1 | |
| Greater London | Barking and Dagenham | £322,675 | 6.2 |
| Kensington and Chelsea | £895,893 | 17.3 | |
| North East | Middlesbrough | £139,678 | 3.9 |
| Northumberland | £230,176 | 6.4 | |
| North West | Blackpool | £141,550 | 3.6 |
| Trafford | £358,854 | 9.2 | |
| Scotland | Inverclyde | £146,030 | 3.5 |
| East Renfrewshire | £288,665 | 6.9 | |
| South East | Portsmouth | £216,713 | 5.2 |
| Elmbridge | £726,523 | 17.4 | |
| South West | Plymouth | £201,008 | 5.2 |
| Cotswolds | £403,153 | 10.3 | |
| Wales | Neath Port Talbot | £153,212 | 4.1 |
| Monmouthshire | £300,079 | 8 | |
| West Midlands | Stoke-on-Trent | £172,917 | 4.5 |
| Stratford-on-Avon | £347,085 | 8.9 | |
| Yorkshire and the Humber | Kingston upon Hull | £134,642 | 3.6 |
| York | £302,747 | 8.1 |
At the other end of the scale, Elmbridge in Surrey remained the least affordable local authority with a house price-to-income ratio of 17.4. Kensington and Chelsea in London followed at 17.3, while St Albans ranked third at 14.1.
Lloyds said: ‘Several traditionally expensive areas recorded some of the largest improvements in affordability, including Westminster (London), where the ratio fell from 15.2 to 13.3; Cambridge (Eastern England), from 11.4 to 10.0; Elmbridge (South East), from 18.7 to 17.4; and New Forest (South East), from 10.1 to 8.7.’
Conversely, several more affordable areas saw their ratios increase. Rossendale recorded the largest increase from 4.8 to 5.4, while Wrexham in Wales increased from 4.9 to 5.5 and Halton from 5.1 to 5.6.
In Greater London, the most affordable location is Barking and Dagenham, with a house price to income ratio of 6.2 and an average property price of £322,675.
Buyers looking for a more affordable option in the south-east of England should consider Portsmouth, where the house price to income ratio is 5.2 and the average cost of a home is £216,713.
In the West Midlands, Stoke-on-Trent is an affordable option, with a house price to income ratio of 4.5 and an average property price of £172,917.
Asaam said: ‘Where you buy continues to make a huge difference to affordability. Our recent research showed homebuyers can save 28 per cent on average by looking just next door to the UK’s priciest postcodes.’
Mortgage rates rising
The data will be of little comfort to buyers facing higher borrowing costs as mortgage rates increase.
Households are being hit with a fresh wave of mortgage rate hikes this week as lenders prepare for higher inflation and interest rates.
Higher interest rates mean average monthly mortgage repayments have increased from an average of £1,100 to £1,157 over the past year according to Lloyds.
The average first-time buyer mortgage payment now accounts for around 34 per cent of income, compared with 41 per cent for those renting.
And in some parts of the UK potential buyers are still being kept out of the housing market due to house prices being much higher than average incomes.
Andrew Asaam, mortgages director at Lloyds, said: ‘There are some encouraging signs for people looking to buy a home. Wages have continued to rise while house prices have remained relatively stable, helping to narrow the gap between earnings and house prices.
‘However, affordability remains stretched for many households. Mortgage rates are higher than they were a year ago and saving for a deposit continues to be one of the biggest barriers facing first-time buyers.
‘Buyers may have more options than they realise, including mortgages designed for those with smaller deposits.’
Ian Harris, president of NAEA Propertymark, said: ‘While the narrowing gap between house prices and earnings is encouraging, affordability on paper does not always translate into affordability at the point of purchase.
‘Buyers are still facing higher borrowing costs and the challenge of raising a deposit, with many having to compromise on property type, location or budget.’
