Buying a home in the UK has long been a challenge for many, but 2024 has brought a modest yet notable improvement in affordability, according to Halifax, part of Lloyds Banking Group. While house prices remain near record highs, a combination of rising wages and slightly reduced mortgage costs is offering a glimmer of hope for prospective buyers. Although these changes may seem small, they signal a shift in the housing market that could provide some respite for those who have found it increasingly difficult to purchase a home in recent years. As wages rise and mortgage costs decrease, more people may be able to take the first steps towards homeownership.
Key Affordability Trends in 2024
Halifax’s data reveals a shift in the housing market:
- Income-to-House Price Ratio: The average house now costs 6.55 times the mean annual full-time income, down from 6.62 in 2023 and a peak of 7.24 in mid-2022. This marks a small but meaningful improvement for buyers, indicating that the gap between income and house prices is beginning to close. While the ratio is still high compared to historic levels, the reduction is a step in the right direction, particularly for first-time buyers who have been struggling to enter the market.
- Mortgage Costs: The cost of servicing a new mortgage has fallen to 29% of the average income, compared to 33% last year. This is based on a 30-year term, a five-year fixed interest rate, and a 25% deposit. Lower mortgage costs mean that more of a buyer’s income can be allocated towards other expenses, making homeownership more feasible. This reduction in mortgage costs is partly due to recent interest rate cuts by the Bank of England, which have helped to alleviate some of the financial burden on prospective homeowners.
- Regional Disparities: Housing affordability varies significantly across the UK:
- Least affordable: Southeast England and London, where mortgages cost 39% and 36% of local salaries, respectively. In these areas, high property values and strong demand continue to make it difficult for many buyers to afford a home, despite the recent improvements in affordability.
- Most affordable: Northeast England (19% of local salaries) and Scotland and Northern Ireland (22%). These regions have benefited from more affordable housing options, making it easier for buyers to enter the market. The disparity between regions highlights the importance of considering location when evaluating affordability, as the opportunities for homeownership can vary greatly depending on where you are looking to buy.
A Mixed Picture for Buyers
Despite these improvements, affordability remains a challenge for many. With house prices still near record highs, buyers face significant hurdles, particularly in regions where housing costs far exceed local wages. The recent reductions in mortgage costs have offered some relief, but the housing market remains shaped by high demand and limited supply in key areas. In many parts of the country, the number of available properties is still insufficient to meet buyer demand, which keeps prices elevated and limits the impact of rising wages and lower mortgage costs.
The Bank of England’s monetary policy has also influenced affordability. After raising interest rates to a 15-year high of 5.25% in August 2023, the Bank has since made gradual cuts, bringing rates to 4.75% this month. These adjustments have lowered mortgage costs, but rates remain above the levels seen in the 2010s, making affordability gains more gradual. Buyers who have been waiting for interest rates to fall further may find some comfort in these recent reductions, but the overall cost of borrowing remains relatively high compared to previous years.
Another factor influencing affordability is the continued imbalance between supply and demand. The shortage of new housing developments and the limited number of properties available for sale mean that prices are likely to remain high in many areas. This makes it crucial for buyers to act strategically, seeking out regions where affordability is improving and taking advantage of lower mortgage rates when possible. The combination of these factors creates a mixed picture for buyers, where opportunities exist, but challenges remain.
What Does This Mean for Buyers?
The housing market remains a balancing act. While affordability is improving, the progress is slow, and buyers must navigate a range of factors that can impact their ability to purchase a home:
- Higher Interest Rates: Even with recent reductions, mortgage rates are still significantly higher than the historic lows seen over the past decade. This means that buyers need to carefully consider their financial situation and ensure they can afford the repayments, especially if rates were to rise again in the future. For those who are able to secure a mortgage, locking in a fixed rate may provide some security against potential rate increases.
- Stable House Prices: The average house price in Q3 2024 was £292,508—broadly unchanged over the past two years. While stability may help some buyers, others may find it difficult to save for larger deposits or secure loans with rising living costs. The fact that house prices have remained stable rather than increasing further could be seen as a positive sign, indicating that the market is beginning to level out. However, for many buyers, the challenge remains to save enough for a deposit while managing other financial commitments.
- Regional Considerations: As noted earlier, affordability varies significantly by region. Buyers may need to be flexible in their location preferences to take advantage of more affordable areas. For example, those considering a move to the Northeast or Scotland may find better opportunities for homeownership compared to those looking in London or the Southeast. Being open to different locations can increase the chances of finding a property within budget and achieving the goal of homeownership.
Looking Ahead: What to Expect?
Economists forecast house price growth of 3.1% in 2025 and 4% in 2026, suggesting that now might be a good time for buyers to consider entering the market before prices climb further. However, affordability will remain heavily influenced by regional variations, wage growth, and future interest rate decisions. Buyers who are in a position to purchase a home may want to act sooner rather than later, as the anticipated price increases could make affordability more challenging in the coming years.
It is also important to consider the potential impact of future interest rate changes. While the Bank of England has started to reduce rates, there is no guarantee that this trend will continue indefinitely. Buyers should be prepared for the possibility that rates could fluctuate, and they should consider their long-term financial stability when deciding whether to enter the market. Wage growth will also play a key role in determining affordability, as higher incomes can help offset the cost of rising house prices and mortgage payments.
How Quick Mortgages Can Help
Navigating the current housing market can be daunting, but at Quick Mortgages, we specialise in finding tailored solutions for buyers at every stage of their journey. Whether you’re a first-time buyer, looking to remortgage, or planning for the future, our team can help you understand your options and secure the best deals available. Our expertise and personalised approach mean that we take the time to understand your unique needs and financial situation, helping you make informed decisions about your home purchase.
We understand that buying a home is one of the biggest financial decisions you will make, and we are here to provide the support and guidance you need throughout the process. From helping you determine how much you can afford to borrow, to finding the best mortgage products and rates, our team is committed to making your home-buying journey as smooth as possible. We work with a wide range of lenders, giving us access to exclusive deals and ensuring that you get the best possible terms for your mortgage.
If you’re considering a move or simply want to explore your options, contact us today for expert advice. Together, we can help you make the most of the evolving market and take advantage of the opportunities that are available. Whether you are ready to buy now or are planning for the future, Quick Mortgages is here to help you every step of the way. Let us guide you through the complexities of the housing market and provide you with the confidence you need to achieve your homeownership goals.
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Disclaimer:
This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.
While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.
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