The average UK home costs the equivalent of 7.3 times average earnings, down from 7.6 a year ago and the lowest level since 2015. Nationally, the average property price increased by +0.5% over the last year, to £299,131, while average earnings rose by +4.5% to £40,790, narrowing the gap between average house prices and earnings leading to hopes of an uplift in market activity.
For first-time buyers (FTB) the house price to earnings ratio fell from 6.1 to 5.9 after a 0.3% rise in average FTB property prices. Commenting on the figures, drawn from an Affordability Review by Lloyds, Andrew Asaam, mortgages director at Lloyds said they should provide encouragement, adding affordability remained stretched with mortgage rates higher than they were a year ago.
Meanwhile Nationwide’s latest house price index reports house price growth has halved to 0.8% in September, the “weakest rate of growth” since December 2025. Commenting, Robert Gardner, Nationwide’s chief economist said due to house price growth being “well below earnings growth for some time” underlying affordability is improving.
Earlier this week the Bank of England’s Money and Credit data revealed net mortgage approvals for house purchases decreased to 54,900 in August, below an average of around 60,100 over the previous 6 months. Mortgage borrowing increased to £4.4 billion in August, from £4.1 billion in July, but remained below the previous 6-month average of £5.2 billion. Approvals for remortgaging decreased to 34,000 in August, from 34,600 in July.
Reacting to the figures Iain McKenzie, CEO of The Guild of Property Professionals, said: “The autumn normally provides a natural boost to activity, but this year elements such as elevated borrowing costs are making that recovery more difficult. Swap rates have risen and some lenders have responded by increasing mortgage rates, putting further pressure on purchasing power.
“That said, there are encouraging signs beneath the headline figures. Home searches are now 7% higher than a year ago, suggesting buyers are re-engaging with the market even if some are not yet ready to commit. With inflation still elevated and borrowing costs continuing to weigh on affordability, more buyers and sellers may choose to sit tight. The autumn market is therefore likely to be characterised by genuine demand, but also a high degree of caution, with affordability and pricing continuing to determine whether interest translates into transactions.”
Nicky Stevenson, managing director of Fine & Country suggested the latest figures “underline just how finely balanced the housing market remains” as buyers have more choice and therefore competition between sellers is “particularly strong”.
President of OnTheMarket Jason Tebb said “all eyes” will be upcoming autumn budget. With a replacement for Help to Buy already announced there is “hope that on balance the budget provides some much-needed impetus for the housing market, as well as the wider economy.”
