A new report has shown that house prices have never been higher when compared with household income, and this could make life more difficult for homebuyers. Seeking expert mortgage advice and perhaps having a flexible approach to where you live can improve your chances of buying a property.

House prices have risen to the point of making affordability tough for potential buyers, according to a report just published by the Office for National Statistics. Its latest report reveals that in the financial year ending March 2021, the average home in England sold for 8.7 times the average annual disposable income. In Wales, the ratio was 6.0 and in Scotland 5.5. The ONS says that while purchase affordability ratios for the average home are below their peaks in Wales and Scotland, affordability ratios in England are worse than at any point since 1999.

Affordable region

The North East is the most affordable region in England. An average-priced home in the North East costs the equivalent of almost 12 years of income for a low-income household compared with 40 years in London.

If you’re hoping to buy your first property, or you would like to move to a bigger home, you may be worried about your ability to afford a new mortgage. Fortunately, although house prices have risen significantly since the pandemic started, there are options. We recommend speaking to an experienced mortgage broker who may be able to look at having a mortgage over a longer term or securing an interest-only mortgage (depending on your personal circumstances). These options would reduce your monthly payments.

‘Interest-only borrowing remains the preserve of high earners or those with significant levels of equity, and it’s hard to see this changing,’ says MB Associates’ Sales Manager Phil Leivesley. ‘However, this may be an option for borrowers with reasonable levels of assets or who genuinely have a capacity to make regular overpayments.’

Phil adds: ‘For most, some consideration could be given to extending the term of the mortgage, if this is possible, which will reduce the monthly mortgage payment. It’s good advice to set a sensible budget for your monthly payments, and this advice has never been more appropriate than now.’

Expensive capital

Affordability also depends on where you intend to live. Although London has seen slower house price growth than other regions (due to more people moving out of urban areas when working from home), it remains hugely expensive in comparison to other areas. Joe Garner, managing director at London-based property developer, NewPlace, says: ‘In the capital, the affordability crisis is beyond extreme. Insatiable demand from an ever-growing population, coupled with a limited supply of housing and a slowing production line of new build development, will see a continued upward path of house prices. Factor in low wage growth, rising rates and inflation, and the outlook becomes even more bleak.’

If you are prepared to be flexible about where you live, you may find your ideal property without overstretching yourself. ‘I moved from Surrey to Essex purely because property is cheaper here,’ says our content manager, Christina Neal. ‘I found a lovely three-bedroom end of terraced house with a garden and a basement in Colchester for the same price I would have paid for a two-bedroom flat in Sutton. I live five minutes away from the town centre and the area has everything I need.’

‘There are still regions around the UK where homes remain very affordable,’ says Phil. ‘It’s not surprise to see the quickest growth in house prices coming from lower value regions such as the North West and North East.’

Ultimately though, we need more affordable properties. ‘Where inflation is borne out of too many pounds sterling chasing too few products, house price inflation is the same concept,’ adds Phil. ‘For decades now, we have failed to build the appropriate number of new homes and homes in the right areas. Rental prices suggest that unsustainable growth hasn’t just happened in the homeowner market alone, and there is a clear need for significant investment in building new social and affordable housing for the rental market as well. Until we address this, it’s hard to see homes becoming more affordable in the long-term.’

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If you’d like us to explore your mortgage options, we’d be happy to help. Contact us for advice.

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