House affordability offers first time buyers boost but Londoners lag behind
Improved house affordability has sparked an uptick in first time buyer activity over the last year, but those on lower incomes remain shut out of the housing market.
Affordability constraints eased slightly, due to declining mortgage rates and wage growth surpassing house price growth, bolstering buyer demand, particularly among those taking the first step onto the housing ladder.
According to Nationwide’s latest housing affordability report, first-time buyer activity jumped above the long term average last year, roughly 20 per cent higher than 2024 levels.
This surge was attributed to easier credit availability and high loan to value lending, meaning a deposit of 15 per cent or less, which reached its highway level for over a decade.
Andrew Harvey, Nationwide’s senior economist, said: “Our main affordability benchmark shows that a prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20 per cent deposit would have a monthly mortgage payment equivalent to 32 per cent of their take-home pay, slightly above the long-run average of 30 per cent and well below the recent high of 48 per cent recorded in 1989.”
North takes the lead
An average 10 per cent deposit on a typical first-time buyer property equals £23,000, taking a prospective buyer nearly six years to save the required amount, but this can vary per region, reflecting the difference in house prices across the country.
But not every first time buyer is able to take advantage of growing affordability, with Londoners in particular still being slapped with high prices.
In London, a 10 per cent deposit is over three times the equivalent of the North at £44,800 and £13,1000 respectively, taking a Londoner nine years to save for their deposit compared to just three years in the North.
Harvey noted the divide between regions means “a significant proportion of first-time buyers still have to draw on help from friends and family to raise a deposit”, with over a third needing to do so last year, either through a gift, loan or inheritance.
London prices stay sky high
Nathan Emerson, chief executive of Propertymark, said: “The fact that a typical first-time buyer still needs close to six years to save for a 10 per cent deposit shows just how significant the deposit barrier remains, especially in London and the South of England.
“Regional and occupational disparities continue to shape who can realistically buy a home.
“Too many buyers are still reliant on financial help from family and friends, and this risks entrenching inequalities between those with access to support and those without.”
Despite the London market requiring the largest deposit, the capital saw the largest improvement in affordability, reflecting weak house price growth and lower interest rates.
However, the region remains the least affordable, while the North, Yorkshire and Scotland became steadily less expensive.
Job market blues
Similar to regional affordability issues, Brits within certain professions also find themselves having to save for longer in order to save enough for a deposit, including sales and customer service workers, labourers and couriers.
Harvey said: “Affordability is most challenging for those working in sales and customer service roles and for those classified as ‘elementary occupations’, which include construction and manufacturing labourers, cleaners and couriers. In these groups, typical mortgage payments would represent around 50% of average take-home pay.
“ In practice, those in higher paid occupations are more likely to purchase more expensive properties… The differences in affordability reflect the divergence in earnings by occupational group.
“For example, managers, directors and senior officials typically take home around twice as much per year than those working in administrative and secretarial roles.”
But Harvey noted all occupations saw “an improvement in affordability” over the last twelve months with those working in leisure or the care sector seeing the highest earnings growth.