"High-fives among aspiring homebuyers" as Nationwide HPI shows homes most affordable in over a decade

PROPERTY experts have welcomed the fact that the price of a typical UK home is around 5.75 times average income, a ratio well below the all-time high of 6.9 recorded in 2022 and the lowest for over a decade. One said “there will be high-fives among aspiring homebuyers around the country as homes become slightly more affordable".

The annual rate of house price growth increased modestly in July to 2.4%, from 2.1% in June, according to the Nationwide. House prices were up 0.6% month on month, while the UK house price to earnings ratio was at the lowest level in over a decade at circa 5.75.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said “July saw a modest pick-up in the rate of annual house price growth to 2.4%, from 2.1% in June. Prices increased by 0.6% month on month, after taking account of seasonal effects.

“Looking through the volatility generated by the end of the stamp duty holiday, activity appears to be holding up well. Indeed, 64,200 mortgages for house purchase were approved in June, broadly in line with the pre-pandemic average, despite the changed interest rate environment.

“After deteriorating markedly in the wake of the pandemic, housing affordability has been steadily improving, thanks to a period of strong income growth alongside more subdued house price growth and a modest fallback in mortgage rates.

“While the price of a typical UK home is around 5.75 times average income, this ratio is well below the all-time high of 6.9 recorded in 2022 and is currently the lowest this ratio has been for over a decade. This is helping to ease deposit constraints for potential buyers, as has an improvement in the availability of higher loan to value mortgages.

“Similarly, the interest rate on a typical five-year fixed-rate mortgage is around 4.3% (for a borrower with a 25% deposit). This is still over three times the all-time lows prevailing in autumn 2021, but well below the highs of c5.7% reached in late 2023.

“Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.

“Unemployment remains low, earnings are still rising at a healthy pace (even after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little further if Bank Rate is lowered further in the coming quarters as we, and most other analysts, expect.

“Providing the broader economic recovery is maintained, housing market activity is likely to continue to strengthen gradually in the quarters ahead.”

Emma Jones, Managing Director at Whenthebanksaysno.co.uk, said “there will be high-fives among aspiring homebuyers around the country as homes become slightly more affordable. The price of a typical home is now around 5.75 times average income, and while this is still high, it's considerably better than what it was after the pandemic".

She continued: "The mini-Budget of 2022 changed everything and one arguably positive outcome is that homes have now become more affordable as house price growth has calmed and wage growth has stayed strong. Given that we're seeing a lot more lenders competing on affordability, more doors will hopefully be opened for aspiring homebuyers. Yes, there are still headwinds but any improvement in affordability is a small win for buyers.”

Babek Ismayil, Founder at homebuying platform, OneDome, agreed: "The modest uptick in annual house price growth to 2.4% shows that the market is holding steady and even regaining some momentum after a tricky spring. July’s 0.6% monthly rise is encouraging, especially following the slowdown caused by April’s stamp duty changes. It suggests that both buyers and sellers are adjusting to the new landscape and moving forward with confidence.

“What’s particularly notable is that the house price-to-earnings ratio has dropped to its lowest level in over a decade, at around 5.75. This shift is making homes more affordable and may help unlock demand, particularly among first-time buyers who have been priced out in recent years. Right now, we’re firmly in a buyer’s market. Agents are reporting more stock on the books and greater competition among sellers, especially in southern England. That means buyers have more choice - and negotiating power - than they’ve had in some time, making this a window of opportunity for those ready to move.”

Ranald Mitchell, Director at Charwin Mortgages, said: “The housing market is showing quiet strength. Prices are rising steadily, affordability has improved dramatically and buyers are regaining confidence. With mortgage rates softening and the price-to-income ratio at its most realistic level in over a decade, this feels like the start of a more balanced market. It’s not boom time, but it is a genuine reset and momentum is building fast.”

Rohit Kohli, Director at The Mortgage Stop, added: “House prices are nudging up, and the bigger picture hasn’t changed: there’s still not enough stock, so prices will keep rising. Affordability is improving, just, but it’s still hard work for buyers. A house still costs nearly six times the average income, and deposits and repayments remain a major stretch. The market’s steady, with transactions holding up better than many expected, especially in the buy-to-let sector. Some lenders are trying to be more innovative to help people onto the ladder, but they’re still the exception. We need more from the market to make buying genuinely accessible. The next test is what the Bank of England does next week.”

Michelle Lawson, Director at Lawson Financial, said: “These figures really do reflect what I am seeing in the Portsmouth area. The last couple of months have been the busiest for a while, seeing a strong uptick in buyers. Prices are holding up well, too. The recent relaxation of affordability from some lenders will help first-time buyers get on the ladder but Labour’s continued farcical grasp of the economy is hampering things still. However, buyers are buying and the supply and demand cycle continues.”

Riz Malik, Director at R3 Wealth, commented: “House prices are still marching on and with the possibility of lower rates and lenders loosening criteria they should continue to grow steadily House price to income calculations have improved since 2022, which shows we have come a long way even though it may not seem so.”

Chris Barry, Director at Thomas Legal, warned that house prices may soon start to fall: “House prices are heading up yet again but this is a lagging data set. Buyers across the month have dropped off significantly across London and the excess stock gap is getting bigger. A busy estate agency office in the Home Counties may typically be dealing with 40 vendors but after the last month could have as many as 80. The demand levels just aren’t there to match, meaning house prices will almost certainly start to come down.”