In 2022, the average house price was £275,000 in England and the average annual disposable household income was £33,000, meaning that a home cost approximately 8.4-times the average income.
According to Office for National Statistics (ONS) data, analysed by Hargreaves Lansdown, the average property costs 13.9-times the average income in London.
In the South East, it was found to be 9.8-times, in the East of England 9.3 and in the South West 8.9.
In England, only the top 10% of households could afford an average home with fewer than five years of income – this rose to 30% in Wales and 40% in Scotland and Northern Ireland.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Runaway house prices made a mockery of housing affordability in 2022, with buyers in England stretched to breaking point to buy an average house worth more than eight times their income – and almost 14 times in London.
“While mortgage rates were low, this kind of financial contortion was feasible, but now people are facing remortgaging at much higher rates, it’s going to be incredibly painful.
“Housing hasn’t been affordable since 2017, according to the ONS, and rampant price rises during the pandemic didn’t help.
“Lower mortgage rates helped people to stretch their finances to bigger loans. However, with 1.4 million people remortgaging at a much higher rate this year, it’s going to bring real pain to hundreds of thousands of people.”
She continued: “When a household spends 25% of its after-tax income on the mortgage, it’s considered to be at risk of falling behind on payments.
“The HL Savings & Resilience Barometer shows that, over the next year, 26% of people will be in this position.
“Meanwhile, 230,000 of those who are ‘at risk’ of falling into arrears have cash savings that cover less than three months of essential spending – making them ‘high risk’.
“Plus, an additional 470,000 also have unsustainable spending, so they’re at ‘critical risk’.”
Coles concluded: “If you’re planning to buy in future, your best protection is to build as big a deposit as you can manage.
“It’s worth getting all the help you can from wherever it’s available – whether that’s from the Bank of Mum and Dad, or by saving into a Lifetime ISA and getting a 25% bonus of up to £1,000 a year from the Government.
“Nothing will make buying a property easy while affordability is so stretched, but the less you have to borrow to get you there, the less vulnerable you will be at a time like this.”
