Are homes becoming more affordable? We take a look.
Lets take a look at the factors
There’s no denying that we’ve all been through a tough time over the last couple of years. More expensive mortgage rates have put quite a dent in our pockets and that’s without taking into account that everything else has been getting more expensive too. The economic climate has meant that the housing market has been substantially quieter than normal. People have been delaying moving or taking their first step on the property ladder. The cost of owning your home has been higher and also there is the worry about committing to higher costs. All of us have been looking for some light at the end of the tunnel and it appears that finally there may be some.
Why is it more affordable
Over the last 12 months several factors would indicate that it’s now much more affordable to make that move. Firstly, according to the Halifax House Price index, houses only rose year on year by 1.7% in value, inflation over the same period according to the ONS was 4%. This means that the net effect is a fall in the “real” value of housing. Over the same period wages have increased by an average of 6.5%.
When you also add in the fact that mortgage rates are falling, homes are becoming more affordable than a year ago. Could this kick start the housing market again? We are definitely seeing more enquiries this month than previously. So are homes becoming more affordable?
To give you a quick idea we’ve put a quick table together to show indicative monthly costs at 3 different purchase prices, we’ve used an average fixed rate and assumed a 15% deposit.
| Purchase Price | Loan Amount | Term | Fixed Rate period | Loan to Value | Monthly Cost |
| £117,647 | £100,000 | 30 years | 5 years | 85% | £486 |
| £235,294 | £200,000 | 30 years | 5 years | 85% | £971 |
| £352,941 | £300,000 | 30 years | 5 years | 85% | £1457 |
| £470,588 | £400,000 | 30 years | 5 years | 85% | £1942 |
| £588,235 | £500,000 | 30 years | 5 years | 85% | £2428 |
Further Commentary on house prices
In the last two decades, the UK housing market has seen significant fluctuations. Notably, between 1997 and 2007, average house prices increased by 184%, while average wages only rose by 38% during the same period.
Recent data shows that property prices in the UK have been increasing faster than wages. In 2020, the average house price was £231,000, while the average full-time weekly earnings stood at £585, implying that a typical house cost nearly five times the average annual salary.
The impact on First-Time Buyers has been obvious. High property prices and the need for substantial deposits present significant barriers to first-time buyers.
In 2020, the average first-time buyer deposit in the UK was £57,278, a considerable sum for many aspiring homeowners. The UK government has introduced schemes like Help to Buy and Stamp Duty exemptions for first-time buyers to address affordability issues. However, these policies have faced criticism for potentially fuelling price increases.
The link between high property prices and rising rents is evident. In areas with expensive housing markets, tenants often pay a large proportion of their income on rent, limiting their ability to save for homeownership.
If we are to see a thriving housing market return prices of property needs to reflect clients incomes more and greater stability in interest rates.
What should I do now?
If you are thinking about buying your first home or have been putting off moving, then gives us a call or book an appointment for some free friendly advice as to whether you can afford it.
If your mortgage product is within six months of ending you can secure another now. Having secured a new product you can feel comfortable that you have something lined up, if the rates are cheaper when your existing product comes to an end you can compare what you have secured now with what’s available at the time and see which is cheaper.
If you’d like to learn more about mortgage products and how we can help you, please don’t hesitate to get in touch with our team. We’re here to help you navigate the ever-evolving world of mortgages and guide you toward a brighter, greener home.