Inverclyde, located in Scotland, has been identified as the most budget-friendly place to purchase a home in all of Great Britain. On the other hand, the cost of houses in Westminster far exceeds workers’ salaries in central London, according to a recent study. The combination of declining house prices and strong wage growth has made homeownership more affordable over the past year, although rising interest rates have placed some constraints. The average cost of a typical UK home reached its peak in June 2022 at £293,586, while the average annual earnings for a full-time worker were £40,196. This resulted in a house price to income ratio of 7.3, the highest level ever recorded. However, over the course of a year, average house prices have fallen to £286,276, and wages have risen approximately 7% to £43,090. As a result, the house price to income ratio has declined to 6.7, according to Halifax.
Halifax compiled national and regional data for the entire UK and broke down the affordability by area using local authorities in Great Britain. Inverclyde, known for its saltwater Lido with an estuary view, has an income ratio score of just 2.9, while central London scores a staggering 16, making it the least affordable place to buy a home in Great Britain. Other areas that follow closely for affordability are Dumfries and Galloway (3.2) and East Ayrshire (3.3) in Scotland. Hull was named the most affordable location in England, with Blackpool and Burnley being the only other English areas to make the top 10, with the rest located in Scotland.
Conversely, Westminster was identified as the least affordable place to purchase a home in Great Britain, with an income ratio score of 16. It was followed by neighboring Kensington and Chelsea, the Mole Valley in Surrey, and St Albans in Hertfordshire. While the narrowing gap between house prices and incomes is good news for potential homebuyers, the overall affordability of housing costs for homeowners has been negatively impacted by rising mortgage rates. Halifax reports that typical monthly mortgage costs have increased by 22% over the past year, rising from £1,020 to £1,249. This increase represents mortgage costs as a percentage of income rising from 30% to 35% in the last year.
Kim Kinnaird, the mortgages director at Halifax, noted that the significant rise in interest rates over the past year has significantly impacted homebuyers and those looking to remortgage. Monthly mortgage payments have risen by approximately a fifth, which is a substantial increase given the current cost of living pressures. Kinnaird also highlighted that mortgage costs as a proportion of income are now comparable to levels seen in 2007, despite the significant rise in house prices over the past 15 years.
In terms of specific locations, Surrey Heath and Cambridge have shown the most improvement in house affordability in Great Britain over the past year. Cambridge, which has long been known for its high house prices in comparison to local wages, experienced a decline in its affordability index from 11.8 to 9.6. In contrast, Pembrokeshire in Wales saw the biggest deterioration in house price affordability, with the price to income ratio rising from 5.8 to 6.9.
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