Lloyds has reported that lower interest rates, higher wages and slower house price growth improved first-time buyer (FTB) affordability in the last year.
According to data, the typical FTB property price was 5.9 times average earnings in the UK, down from 6.2 a year ago.
Average FTB property prices rose by 2.4% to £237,518, while average incomes increased by 6.2% to £40,021.
The last time this ratio was below 6.0 was at the end of 2015.
Monthly mortgage costs for FTBs edged up 0.1% to £1,087.
This was due to lower average mortgage rates, which fell from 4.7% to 4.5% on a 5-year fixed deal with a 10% deposit and 30-year term.
Mortgage payments as a proportion of income fell from 34.6% to 32.6%, the lowest since mid-2022.
Amanda Bryden, head of mortgages at Lloyds, said: “Buying your first home is still a big challenge, but things are moving in the right direction.
“Lower mortgage rates, stronger wages and slower house price growth mean it’s becoming a little easier to get on the ladder – the best it’s been for several years.
“Big national numbers often make the headlines, but the reality is that the housing market can look very different from one town to the next.”
Bryden added: “If you’re searching for your first home, being flexible on location can really help – sometimes moving just a few miles from your preferred area can unlock much better value.”
Rental costs in the UK rose 5.5% over the last year to an average of £1,346 per month.
Despite the rise, rent as a percentage of income stayed at around 40% due to wage growth.
Renting is now £259 per month more expensive on average than typical FTB mortgage costs, a gap that has increased by 36% over the year.
In England, Greater London, the South East, Eastern England and the South West saw the property price to income ratio for FTBs fall by 0.4 over the year, though these regions remain the most expensive.
The North East was the most affordable region with a ratio of 3.9, up from 3.8 due to property prices rising by 10%, outpacing a 7% rise in incomes.
Mortgage costs as a percentage of income remained at 22% in the North East, compared to 51% in Greater London.
Scotland had a property price to income ratio of 4.0, unchanged, while Northern Ireland stood at 5.1, up 0.2.
Wales was at 5.3, down 0.1.
Across the UK, the overall property price to earnings ratio dropped from 7.8 to 7.5 over the year.
The typical property cost £298,521, up 1.9%, while average incomes rose by 6.2%.
Inverclyde, Scotland, was the most affordable local area with a property price to earnings ratio of 3.4, followed by Kingston upon Hull at 3.5.
Kensington and Chelsea was the least affordable at 17.7, with Elmbridge next at 16.6.
The Cotswolds saw the biggest improvement, with the ratio dropping from 12.0 to 9.6.
Staffordshire Moorlands saw the biggest deterioration, with the ratio up from 5.7 to 6.3.
Bryden added: “Buying a home is one of the biggest financial decisions most of us will ever make.
“It’s not just about saving money compared to renting – owning a property means building equity and creating a more secure financial future.
“If saving for a deposit feels daunting, start by speaking to a mortgage expert.”
She said: “They can help you work out what’s affordable and guide you through the options, including low-deposit mortgages that let you buy with as little as 5% down.”
Mary-Lou Press, president of NAEA Propertymark, said: “While it is encouraging to witness an emerging trend of falling rates on offer across many key mortgage products, as well as rising wages which are helping to enhance first-time buyer affordability, the Autumn Budget seemed like a missed opportunity in many ways to further energise the housing market overall.
“With a population expected to exceed 70m people in less than five years, there is vast pressure to deliver new homes across all regions.
“Over the forthcoming year it will prove essential to see investment in the correct skillset and supply chains to enable this objective to become a reality.”
