Housing is more affordable than a year ago, says Halifax

Housing is now more affordable than it was a year ago, according to the UK’s biggest mortgage lender Halifax. The lender cited falling house prices and increased wages, reporting that a typical home now only costs 6.7 times the average income, compared to a record 7.3 times last year. 

Halifax’s report measured typical house prices across the UK, comparing the data with average incomes. While house prices have fallen in the past year, the average wage in the UK has increased by around 7% over the same period. At its peak in June 2022, the average house cost £293,586, with an average full-time salary of £40,196 a year. The gap closed 12 months on: Halifax reported the average house cost £286,276, and the average full-time wage has increased to £43,090.

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However, these figures alone don’t paint the entire picture of the housing market or the costs households are facing. Although house prices are falling, mortgage rates and the cost of living are still on the increase, which is still blocking some households from getting on the housing ladder.

“The sharp rise seen in interest rates over the last year has meant the sums now look very different for both homebuyers and those looking to remortgage,” said Kim Kinnaird, mortgages director at Halifax. “Typical monthly mortgage payments are up by around a fifth, which is a big jump at any time, but particularly during a wider cost of living squeeze.”

“We don’t yet know what the ‘new normal’ looks like for mortgage rates and house prices over the longer-term. But we expect the market to rebalance as both buyers and sellers adjust their expectations to reflect higher costs and lower demand. It’s likely the gap between average earnings and property prices will narrow over time, which will be welcome news to first-time buyers in particular, especially in areas which could offer better value for money.”

While the initial price tag of a house may be more affordable than it was last year, the interest on mortgages means buyers will still be spending an even bigger chunk of their pay on housing. This affects renters as well, who may face rent increases to cover their landlord’s mortgage costs. 

Halifax reported an average 22% increase in typical monthly mortgage payments over the last year, rising from £1,020 to £1,249 per month. Compared with 2020 however, when a stamp duty holiday and low interest rates saw greater demand among buyers, the monthly cost of a mortgage has gone up 65%, increasing from an average of £731 a month, Halifax said.

The increase is also not felt equally across the UK. While the average house price to income ratio has fallen in most places (the only exception being Wales), prices are still skyrocketing faster in some areas than others. 

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London, despite its relatively slow rate of price increase compared to the rest of the country, still has a considerably higher price to income ratio, with houses now sitting at around 9.3 times the average annual income. By contrast, houses in the north-east of England are sitting at a price to income ratio of almost half London’s at 4.9 times. Inverclyde on the west coast of Scotland was reported as the most affordable place in the UK to buy a property, with an average price to income ratio of only 2.9.

We want to know whether homes have become more affordable in your area. Do you feel like your housing costs have become more affordable in the last year? Have you got on the housing ladder in the last year? We want to hear from you –get in touch and tell us more!