Revealed: the most and least affordable areas to buy a home in the UK
Buying a home is more affordable than it was last year, thanks to falling house prices and strong wage growth.
That's according to Halifax, which says that a typical home in the UK now costs 6.7 times the average annual earnings of a full-time worker, down from 7.1 last year.
However, the reduction is constrained by the high mortgage rates millions are now facing. As a result, a typical home is still less affordable than it was near the start of the pandemic.
Here, Which? takes a look at what's happened to affordability, reveals the 10 most and least affordable areas to buy a home, and offers advice on what might be next for property prices.
Is buying a home more affordable now?
Strong wage growth of around 7% has helped narrow the gap between income and house prices.
House prices have also retreated from their peak and are 2.4% lower than 12 months ago, according to Halifax.
This is positive news for prospective buyers, however, the overall affordability has been offset by the dramatic hikes to mortgage rates over the past year.
An average two-year fix is now 6.74%, compared to 3.95% in August 2022. For someone with a £200,000 mortgage repaid over 25 years, this results in a £331 difference in their monthly bill.
Kim Kinnaird, Halifax's mortgage director, said: '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.'
- Find out more: best mortgage rates for home movers and first-time buyers
Can you afford to buy in your area?
House prices vary significantly around the UK, with the average cost of a home in London around three times that in the North East of England.
People working in London and the South East have the highest average wages, but this doesn't make up the shortfall required to keep pace with high property prices.
Halifax's data shows that an average homebuyer in London needs to spend 9.3 times their annual earnings to buy a home, almost double the figure required in the North East.
The average house-price-to-income ratio has fallen in every nation and region over the past year, with the exception of Wales, where it rose from 6.7 to 6.8.
| Region | Average house price | Average earnings | House price to earnings ratio |
|---|---|---|---|
| London | £533,057 | £57,203 | 9.3 |
| South East | £384,106 | £43,335 | 8.9 |
| South West | £301,248 | £37,561 | 8 |
| East of England | £333,343 | £42,897 | 7.8 |
| Wales | £215,183 | £31,654 | 6.8 |
| West Midlands | £251,139 | £37,002 | 6.8 |
| East Midlands | £238,755 | £40,162 | 5.9 |
Source: Halifax
As for the whole UK picture, a buyer is spending 6.7 times their income when securing a house.
The typical first-time buyer faces house prices 5.4 times their average earnings. This is a reduction from last year, when the figure was 5.8 times.
According to UK Finance, the average household income (eg partners' shared income) of a first-time buyer mortgage application last year stood at just under £60,000, which would put the equivalent house price to joint-income ratio at around 3.8.
- Find out more: is it possible to buy a home on your own?
Most and least affordable places to buy a home
Seven of the top 10 most affordable areas to buy a home are in Scotland, with each recording average house prices lower than four times local earnings.
Inverclyde (2.9 times earnings) leads the way, followed by Dumfries and Galloway (3.2) and East Ayrshire (3.3). Hull, Blackpool and Burnley are the most affordable areas in England.
At the other end of the spectrum comes London, with Westminster (16) and Kensington and Chelsea (15.7) being the least affordable places in the UK. They are followed by Mole Valley (13.2) and St Albans (13.1).
The graph shows the top 10 least affordable and most affordable places to live, based on income to house price ratio.
The district of Surrey Heath has seen the biggest improvement in affordability over the past year (dropping from 11.8 to 9.6), followed by Cambridge, and Windsor and Maidenhead.
- Find out more: how to find the best place to live
How much income is spent on mortgages?
Halifax says Londoners are spending 49% of their income on their mortgage bills. This is closely followed by homeowners in the South East (46%) and the South West (42%).
Those in the North East and Scotland spend the smallest proportion of their income on a mortgage, with just 26% going towards repaying their home loans each month.
To find out what percentage of income is spent on a mortgage in your area, simply hover over your region on the interactive map.
- Find out more: finding the best mortgage deals
What will happen to house prices in the future?
Halifax says the average home now costs £286,276 - that's a reduction from the £293,586 figure seen last summer, but is still significantly inflated from where we were pre-pandemic.
There were predictions of house prices toppling in 2023, however, this is yet to happen. In July, Halifax reported just a 0.3% slip from June, while the latest Land Registry data shows an uplift in prices month-on-month.
Without a crystal ball it's impossible to say what will happen in the future, but prices are remaining stubborn at the moment.
Estate agency Savills forecasts prices will pick up again next year, and will grow by 6.2% over the next five years.
The Office for Budget Responsibility believes prices will drop again next year before ending up 3.5% higher come 2027.
- Find out more: how far will house prices fall?
How to find the best place to live
If you're planning on buying this year, it's important to remember that the right place to live isn't just about the property or its price.
Thoroughly research an area before taking the leap, and think about your priorities - such as nearby open spaces, local schools and transport links.
Our guide on finding the best place to live contains lots of great tips on how to settle on the best area to buy a home.
