House prices today are, on average, slightly more affordable than they were two decades ago, according to fresh data released by Nationwide Building Society.
The figures look at the ratio between average property prices and average annual incomes for those in full-time work.
From April to June this year, the average house price in the UK stood at around 5.8 times the average annual salary.
This shows a small improvement compared to the same three-month period back in 2005, when the average home cost roughly 5.9 times a typical full-time worker’s yearly income.
Over the past 20 years, house prices have risen by about 73 per cent, while average earnings have gone up by around 76 per cent during the same period.
Despite this modest progress in affordability, it’s worth noting that the current price-to-earnings ratio of 5.8 still remains well above the longer-term average of 4.8.
These figures highlight that while wages have largely kept pace with rising property prices over two decades, homes are still significantly less affordable than they were historically.
Nationwide’s data provides some reassurance that the affordability gap hasn’t widened further over recent years, but also underlines that owning a home remains a major financial stretch for many.
In many parts of the country, especially London and the South East, the multiple of income needed to buy a property is still much higher than the UK average.
For first-time buyers and younger households, saving for a deposit and passing affordability checks remain big hurdles.
At the same time, slower house price growth and steady wage rises in some regions have offered a little relief for prospective buyers.
However, even a marginal improvement in affordability doesn’t change the fact that house prices remain historically expensive.
Experts say wider measures, such as increasing the supply of homes and supporting wage growth, are needed to bring affordability closer to its long-term average.
With economic uncertainty and interest rate changes also affecting the market, it remains to be seen whether affordability will improve further.
For now, while homes are fractionally more affordable than 20 years ago, many buyers still face the challenge of prices sitting well above what was once considered the norm.
These areas AREN’T more affordableÂ
Here’s a rewritten, longer version in British English, divided into around 15 paragraphs and sounding more natural and original:
Whether property has become more or less affordable in the UK really depends on which part of the country you’re looking at.
For instance, in London, affordability has worsened notably. Over the past two decades, the house price to earnings ratio in the capital has jumped from 7.1 to 9.2. This means buying a home there has become even more of a stretch for the average worker.
A similar trend can be seen in the areas surrounding London. In the outer metropolitan regions, the ratio has increased from 6.9 to 8 over the same period. This highlights how expensive living close to the capital has become.
In contrast, the North has seen affordability improve over the years. The average house price to earnings ratio there has fallen from 5.4 in 2005 to just 4 in 2025. This change largely reflects slower house price growth compared to the rest of the country.
Higher house prices relative to income often make it harder for would-be buyers to save enough for a deposit, particularly in hotspots like London and the South East.
Richard Donnell, executive director at Zoopla, points out that future changes in affordability will vary depending on the region and the scope for further house price increases.
He explains that in Southern England, home values have been beyond many buyers’ reach for some time. This is one reason why house prices in these regions are struggling to climb any higher, especially with mortgage rates now at higher levels.
Interest rates also play a crucial part in determining affordability by directly affecting mortgage payments.
Compared with 2005, mortgage payments have actually fallen slightly relative to take-home pay for a first-time buyer, according to Nationwide’s latest figures.
For someone buying their first home with a 20 per cent deposit, monthly mortgage payments now account for about 34 per cent of their net income. This is a small improvement from 38 per cent back in 2005.
However, it’s important to note that affordability has become tougher again over the last five years, largely due to the sharp rise in interest rates seen in 2022 and 2023.
In July 2020, a first-time buyer could lock in a five-year fixed mortgage rate as low as 1.7 per cent. Today, most new buyers are paying rates closer to 4 or 5 per cent, with the lowest five-year fix currently at 4.15 per cent.
To put that into perspective, someone borrowing £200,000 in 2020 at 1.7 per cent over 25 years would have faced monthly repayments of around £818. Now, with the same mortgage amount at a 4.015 per cent rate, payments have risen to about £1,072 a month.
Nationwide’s data shows that mortgage costs as a share of take-home pay have increased from 27 per cent in 2020 to 34 per cent today, showing how rising interest rates have squeezed buyers’ budgets.
Looking ahead, Nationwide expects affordability to slowly improve again thanks to a likely fall in interest rates and wages rising faster than house prices.
Even so, while the national house price to earnings ratio suggests homes aren’t necessarily less affordable on average than they were 20 years ago, it doesn’t mean it’s as easy to get on the ladder now.
Jeremy Leaf, a north London estate agent and former RICS residential chairman, points out that rising rents have made it harder than ever for people to save a deposit. This remains one of the biggest obstacles for today’s first-time buyers.
Jeremy Leaf points out that the house price-to-earnings ratio doesn’t reveal the full picture, particularly when it comes to the sharp rise in rents seen over recent years, especially in London and other major cities.
According to Leaf, these higher rents have made it increasingly challenging for first-time buyers to save enough for a deposit. This, in turn, has forced many would-be buyers to delay plans to purchase a home.
He also highlights how the end of the stamp duty holiday last March had a noticeable effect on the market. The significant drop in transaction numbers that followed showed just how important help with upfront costs can be for first-time buyers in particular.
Leaf observes a shift in demand in his own offices too. Properties in higher price brackets and in traditionally more sought-after locations have started to see weaker interest compared to homes in cheaper areas.
Looking ahead, he suggests this trend could persist unless the government makes changes to existing support schemes. For instance, he believes improving take-up of the ‘Freedom to Buy’ scheme by setting more generous terms than those offered by the earlier Mortgage Guarantee Scheme could help stimulate demand across the entire housing market.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property