In 2023, full-time employees in England were spent around 8.3-times their annual earnings when buying a home, new data from the Office for National Statistics (ONS) has revealed.
In Wales, this figure stood at 6.1-times their annual earnings.
At the national level, these ratios were similar to 2022, and represent a return to the pre-Covid trend after a large increase between 2020 and 2021.
In the 318 local authorities in England and Wales, housing affordability improved in 237 (75%) since 2022, worsened in 77 (24%), and stayed the same in the remaining 1%.
In 2023, 7% of LAs had homes bought for less than five times workers’ earnings and therefore deemed affordable; this is more than in 2022 and similar to numbers before the pandemic.
The 10 largest improvements in affordability in the past five years were in local authorities in London or bordering London; however, they remain some of the least affordable areas.
New dwellings in each region and country cost more than five times average earnings in 2023; only existing dwellings in the North East cost less than that.
Reaction:
Gary Bush, financial adviser at MortgageShop.com:
“In 2023, the gulf between UK house prices and household incomes became gargantuan.
“This was caused by the sudden shock of relentless mortgage rate rises following the mini-Budget debacle, and property prices still in the main holding fast.
“Mortgage affordability calculations during the rate increase period were tightened by lenders, making it even harder to gain maximum mortgage advances.
“On a positive note, if the base rate starts to edge down during 2024 as inflation eases, this should lessen the affordability challenges faced by borrowers.”
Andrew Montlake, managing director at Coreco:
“The affordability gap has grown over the past few years, illuminating the vast chasm between the haves and have-nots when it comes to being able to get a foothold on the property ladder.
“A myriad of poor political policies stretching back decades, facilitated by an endless stream of short-term housing ministers with no long-term plan has led us to where we are now.
“We continue to build too few houses of the type people actually want, with social housing decimated and the private rental sector (PRS) under pressure.
“This has meant stock is often only affordable with the help of Government schemes that prop up prices.
“We need a change in outlook and a long-term plan that sees all stakeholders in UK Housing coming together to ensure a better, more affordable and sustainable future.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“Mind the Gap. 2023 was yet another year when wages did not keep up with cost of living and rising mortgage payments.
“This, coupled with increased taxation and house prices still creeping up, has widened the affordability gap between what lenders deem people can afford to borrow and the amount they need to buy a suitable home.
“This is a problem that has been growing for decades with the result that, for many aspiring homeowners, the housing ladder has become a mirage.”
Charles Breen, founder at Montgomery Financial:
“Relentless house price rises have hamstrung homeowners’ affordability.
“While house prices peak, pay cheques not keeping pace have left the vast majority struggling with affordability and unable to get on the property ladder.
“It appears our social contract with the Government for them to provide hard-working people the chance of homeownership has been torn up.
“This isn’t affordable Britain, it’s rip-off Britain.”
Shaun Sturgess, director at Sturgess Mortgage Solutions:
“In South Wales, affordability is a real issue, largely caused by rising house prices and salaries that haven’t kept up.
“The WFH trend triggered by the pandemic has a lot to answer for, too, in terms of its effect on affordability in South Wales.
“We’ve noticed significant house price increases where borrowers from the South East and other areas have moved further afield to increase their purchasing power, which has driven up prices and pounded affordability.
“Now that many companies are asking their staff to return to the office, borrowers who relocated are subsequently trying to sell their already inflated properties at the expense of even higher pricing, further accentuating affordability issues.”
David Sharpstone, director at CIS Mortgage Advice:
“The perception may be otherwise, but 2023, in my opinion, was a good year for mortgage affordability.
“Most of the high street lenders continued to reduce their underlying stress rates and became more relaxed for self-employed.
“I used the Nationwide Helping Hand 5.5x income product for many of my first-time buyer clients.
“As the rate of inflation settles down, lenders will have more confidence to loosen their borrowing belt in 2024.”
Simon Bridgland, broker and director at Release Freedom:
“It’s hard to see affordability increasing any time soon unless we have the mother of all property crashes.
“Average wage growth as it has happened over the last year is just being used to support the sinking ship of living costs, not create further mortgage affordability.
“The dream of homeownership in the UK for many on average salaries has been smashed to pieces by the ever-hungry appetite of those who have affordability and gone on to own extra rental property.
“For over a decade investors were looking for a home for their cash away from near zero returns in deposit based accounts and without the volatility of investment returns.
“Perhaps the eye-watering pressure of higher interest rates and tax burdens that landlords suffer help the situation in part by the fact they are leaving that market in their droves.”
Graham Cox, director at SEMH Self-Employed Mortgages:
“House prices are eye-wateringly high in many parts of the country, with an ever-growing disconnect between property values and average wages.
“High housing costs reduce social mobility, increase homelessness and create division in society.
“All whilst adding a huge burden on the taxpayer for billions of pounds of housing benefit.
“It’s totally unsustainable and a radical rethink is required by the next government.”
Riz Malik, director at R3 Mortgages:
“To make housing more affordable we need to increase supply.
“To do that we need to build more houses.
“Each of the 16 housing ministers since 2010 were probably aware of this and yet here we still are.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“The UK desperately needs a revamp of its entire economic model.
“It’s serving no one but the 1%. I’m sitting waiting patiently for the next Tony Benn to inspire the change.”
Ben Perks, managing director at Orchard Financial Advisers:
“We have been thrown into an affordability crisis over the past 12 months.
“New borrowers have struggled to achieve the loan amounts they desire, and existing borrowers have often struggled to cover their current mortgages, which has prevented them from shopping around.
“Affordability in the buy-to-let sector has been hit for six. As rates reduce, albeit slowly, this year we should see affordability improve.
“The sooner this happens the better, as affordability has been the biggest hurdle in the housing market for the past 12 to 18 months.”
Michelle Lawson, director at Lawson Financial:
“In 2023, lenders tightened their belts due to interest rate rises, which had a brutal impact on affordability in both residential and buy-to-let.
“To boost their affordability and maximise their borrowing power, borrowers should steer clear of Klarna-type spread payments, keep on top of their credit file and keep debt to a minimum.”
Scott Taylor-Barr, principal adviser at Barnsdale Financial Management:
“Wage growth in the UK and house price growth are completely out-of-sync, and for decades now property prices have risen at a rate that far outstrips the increase in people’s income.
“This squeeze has been hidden in recent years by government schemes such as the Help-to-Buy equity loan, or to a lesser degree, stamp duty holidays, but that can’t continue indefinitely.
“Affordability is a subject often spoken about in mortgage circles; it’s the calculation that lenders do, each with their own formula, to assess your income and outgoings and decide the level of mortgage borrowing that they feel you can manage.
“It is impacted by a whole host of outside factors that you have little or no control over: interest rates, energy prices, food prices, etc.
“You can have some sway on the outcome, but essentially the only tool you have in your direct control is how long you pay the mortgage back over and whether to take a longer-term fixed rate of 5-years or more.”
Rohit Kohli, director at The Mortgage Stop:
“Housebuilding in the UK is broken. We’re not building enough of the right type of homes in the right places of the right quality.
“Affordability stress tests have been toughened by lender, with the right intentions, but salaries, as everyone knows, have not kept up with rocketing house prices fuelled by the low supply of new housing stock.
“What do you expect when you have a government that lacks a strategic plan and has a revolving door of housing ministers?”
