House prices are MORE affordable than 20 years ago - but they are still up to 9 times salary in some areas
This is based on the ratio comparing average incomes and average property prices.
Between April and June this year, Nationwide says the average UK house price was 5.8 times the average annual salary of someone in full time work.
This is marginally down on the same three month period in 2005 when the average house price was 5.9 times the average annual full time salary.
Over the last 20 years, house prices have increased 73 per cent compared to earnings growth of 76 per cent over the same period.
However, the current house price to earnings ratio is still above the long-run average of 4.8.
These areas AREN'T more affordable
Whether property has become more or less affordable will also greatly depend on where in the country someone lives.
For example, in London, the house price to earnings ratio has risen from 7.1 to 9.2 over the past 20 years, which means property is less affordable in the capital.
The surrounding outer metropolitan regions of London also saw a rise from 6.9 to 8.
Meanwhile, the North has seen the most improvement, with a fall in average house price to earnings ratio from 5.4 in 2005 to 4 in 2025. This reflects the fact that house price growth has been the lowest there over this period.
High house prices relative to earnings make it more challenging for prospective buyers to save for a deposit, particularly in London and the South East.
Richard Donnell, executive director at Zoopla said: 'Future improvements to the house price to earnings ratio will vary depend on the region of UK and the headroom for house price growth.
'Home values have been unaffordable in Southern England for some time and remain so, which is why house prices are struggling to rise as a result of higher mortgage rates.'
The other key factor in relation to affordability is interest rates and their impact on mortgage payments.
Compared with 2005, mortgage payments have slightly decreased relative to take-home pay for a first-time buyer, according to Nationwide.
Based on someone buying their first property with a 20 per cent deposit, average mortgage payments currently account for 34 per cent of take home pay, compared with 38 per cent in 2005.
However, it's worth pointing out that affordability has deteriorated from a mortgage cost perspective over the past five years given the sharp rise in interest rates in 2022 and 2023.
In July 2020 someone buying with a 20 per cent deposit could bag a five-year rate as low as 1.7 per cent.
Now, most buyers are securing mortgage rates around 4 to 5 per cent. The lowest five-year fix for someone buying with a 20 per cent deposit is 4.15 per cent.
Someone buying a property in 2020 with a £200,000 mortgage at 1.7 per cent with a 25 year repayment term would have been paying £818 a month.
However, someone buying today with a £200,000 mortgage today and a 25 year term on a 4.015 per cent rate can now expect to pay £1,072 a month.
Nationwide says the typical mortgage payments were 27 per cent of take home pay between April and June 2020, far less than the 34 per cent proportion today.
Looking ahead, Nationwide says it expects a gradual easing in affordability constraints through a combination of falling interest rates and earnings outpacing house price growth.
However, while the house price to earnings ratio suggests property isn't any less affordable on average than it was 20 years ago, it doesn't necessarily mean that getting on the ladder is as easy as it was 20 years ago.
Jeremy Leaf, north London estate agent and a former Rics residential chairman argues that rising rental prices has made it harder for people to save a deposit towards buying their first home.
'What the house price-to-earnings ratio doesn't show is the impact of the rise in rents over that period - particularly in London and other cities,' said Leaf.
'That increase has made it more difficult for aspiring first-time buyers to save for deposits and resulted in the postponement of many moves.
'The sharp drop in transaction numbers following the ending of the stamp duty holiday last March showed the importance of financing those initial costs to first-time buyers in particular.
'In our offices, we have noticed how the demand for higher-priced properties in more favoured locations has struggled recently compared with less expensive areas.'
He adds: 'Looking forward, that trend is likely to continue unless the government can improve for instance take-up in its 'Freedom to Buy' scheme by setting more generous terms than under the previous Mortgage Guarantee Scheme which would give a lift to the whole market.'
How to find a new mortgage
Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.
Buy-to-let landlords should also act as soon as they can.
Quick mortgage finder links with This is Money's partner L&C
> Mortgage rates calculator
> Find the right mortgage for you
What if I need to remortgage?
Borrowers should compare rates, speak to a mortgage broker and be prepared to act.
Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.
Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.
Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power.
What about buy-to-let landlords
Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages.
This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak to a broker.
This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.
Interested in seeing today's best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
If you're ready to find your next mortgage, why not use L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
> Find your best mortgage deal with This is Money and L&C
Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.
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