In England the average house price was £275,000 in the financial year ending 2022, and the average annual disposable household income was £33,000, equivalent to a ratio of 8.4 years of income, according to the latest Housing Purchase Affordability Report from the ONS.
This compares with average house price to income ratios of 6.4 in Wales, 5.3 in Scotland and 5.1 in Northern Ireland in the FYE 2022.
Current trends are mixed; in England, Scotland and Northern Ireland, affordability ratios improved slightly compared with the previous financial year; in Wales, the affordability ratio worsened, from a ratio of 6.1 to 6.4.
On average, homes in all four countries have sold for more than five years' worth of average household income since 2017, putting them below our affordability threshold of five years of income.
Average priced homes in all four countries have been below our affordability threshold throughout the series for low-income households, using a threshold of five years of income.
In England, only households in the top 10% of income can afford an average home with fewer than five years of income; in comparison with the top 30% in Wales, and the top 40% in Scotland and Northern Ireland.
Karen Noye, mortgage expert at Quilter:
"This situation will now be even worse as these calculations do not take into account any effects on housing cost affordability resulting from changes to mortgage interest rates and payments stretching people’s budgets that much further leaving with even less to save towards a deposit to buy a property.
"The impact of this huge affordability pressure has already starting to be seen as people are forced to take out marathon mortgages just to be able to afford monthly payments. Data gathered by Quilter from the FCA shows there has been a near 120% uptick in the number of people taking out mortgage terms of 35 years or more. This highlights that more people are being forced to stretch their finances, opting for longer-term mortgages to manage monthly payments amidst climbing interest rates and high house prices. Strikingly, there is a significant increase in older borrowers who will still be repaying their mortgages well into their 70s, potentially diverting a considerable portion of their retirement savings to meet their mortgage obligations.
"Looking forward, the pressures on affordability may lead to a downturn in house prices. The latest house price indices all point to declining or flatlining house prices. However, prices will need to drop considerably or wages increase massively for the affordability ratios to improve. While both are unlikely, the building of new homes to ease the supply and demand dynamic, and help first time buyers is likely to be a central battleground for next year’s election."