The average property price has fallen below six times the average earnings (Picture: Getty Images)
New data from Lloyds Banking Group reveals a notable easing in the affordability challenge facing first-time homebuyers across the United Kingdom.
The findings, drawn from the latest market analysis, show that the average property price for first-time buyers now stands at £237,518, representing 5.9 times the average UK earnings of £40,021.
This ratio marks the most affordable level for nearly ten years, last seen at the close of 2015.
This is because, despite a modest 2.4% increase in property prices over the past year, average incomes have grown more rapidly by 6.2%.
And the typical monthly mortgage payment for a first-time buyer has remained virtually flat, rising by a mere 0.1% to £1,087.
This stability is linked to a reduction in the average interest rate on five-year fixed mortgages from 4.7% to 4.5%.
Meanwhile, mortgage costs as a proportion of income have fallen from 34.6% to 32.6%, the lowest level recorded since mid-2022, prior to the rise in interest rates.
Lower mortgage rates, rising wages and slower house price growth have improved affordability (Picture: Getty Images)
Amanda Bryden, head of mortgages at Lloyds Banking Group, said: ‘Lower mortgage rates, rising wages and slower house price growth mean affordability is steadily improving… it’s now better than it’s been for several years.’
Bryden also highlighted that flexibility in the location of purchase can significantly improve affordability, stating that moving the search area by just a few miles can unlock homes better matched to buyers’ budgets.
Regional variations remain
The improved affordability is widespread but uneven across the UK.
Greater London remains the most expensive market with a price-to-earnings ratio of 9.3, though this is a slight improvement of 0.4 points from the previous year.
The South East, Eastern England, and the South West also benefit from increased affordability despite still ranking among the priciest areas.
There’s a clear divide in regional affordability (Picture: Bloomberg via Getty Images)
Conversely, the North East continues to be the most affordable region, with an average price-to-earnings ratio of 3.9, reflecting strong income growth that outstrips rising property prices.
Scotland follows closely with a stable ratio of 4.0. Meanwhile, Northern Ireland and Wales have experienced minor fluctuations but retain comparatively affordable housing markets.
Changing buyer profiles help people get on the property ladder
An increasing number of first-time buyers are applying jointly, with 62% now purchasing properties with partners, family members, or friends.
This trend increases borrowing capacity and reduces mortgage cost burdens relative to income.
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But despite these positive trends, some challenges loom.
From April 2025, reforms to Stamp Duty will reduce the tax-free threshold for first-time buyers from £425,000 to £300,000, potentially increasing purchase costs for homes priced above this new limit.
Furthermore, concerns have emerged regarding the Lifetime ISA (LISA) scheme, as its house purchase limit may fall short of average property prices in over 10% of UK local authorities by 2027, posing a risk to affordability benefits for some buyers.
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While the current market conditions suggest the UK first-time buyer affordability is at its most favourable position in nearly a decade, individuals are advised to remain strategic, adapting to regional market conditions and seeking tailored mortgage advice to maximise these financial improvements.
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