Improving affordability helped support a stronger year for first-time buyers in 2025 although significant differences remain across regions and occupational groups, according to Nationwide’s latest Housing Affordability Report.
Nationwide says that affordability constraints eased over the year as earnings growth continued to outpace house price inflation and mortgage rates declined steadily.
This combination helped underpin buyer demand and encouraged more first-time buyers into the market.
Using its main affordability benchmark, Nationwide estimates that a buyer earning the average UK income and purchasing a typical first-time buyer property with a 20% deposit would face monthly mortgage payments equal to 32% of take-home pay.
MARKED IMPROVEMENT
While still slightly above the long-run average of 30%, this represents a marked improvement compared with recent years and remains well below the historic peak of 48% recorded in 1989.
Affordability has also improved when measured against earnings. The first-time buyer house price to earnings ratio fell to 4.7, continuing a trend seen over recent years and now sitting slightly below its 20-year average.
However, the challenge of saving for a deposit remains a major obstacle.
Nationwide estimates that a 10% deposit on a typical UK first-time buyer property is now around £23,000. Even saving 10% of average net monthly pay – roughly £320 – it would take close to six years to accumulate this amount.
EASING AFFORDABILITY
Andrew Harvey (main picture, inset), Nationwide’s senior economist, says: “With price growth well below the rate of earnings growth and a steady decline in mortgage rates, affordability constraints have eased somewhat over the past year, helping to underpin buyer demand.”
He adds that this improvement has translated into higher activity levels.
“The first-time buyer share of house purchase activity was above the long-run average, supported by easier credit availability, with the share of high loan-to-value lending reaching its highest level for over a decade,” he says.
“First-time buyer activity over the last year was around 20% higher than 2024 levels.”
DEPOSIT CHALLENGE
Despite this, Harvey reckons that deposit requirements remain particularly challenging for renters.
He says: “This suggests it is a little easier for prospective buyers to save for a deposit, although it is still particularly challenging for those in the private rented sector, given rental increases in recent years.”
In London, a 10% deposit is more than three times larger than in the North of England, meaning it would take around nine years for an average buyer in the capital to save, compared with roughly four years in the North.
As a result, family assistance continues to play a significant role, with more than a third of first-time buyers in 2024–25 receiving help via gifts, loans or inheritance.
The report also highlights wide variation in affordability across occupations.
Mortgage payments relative to take-home pay are lowest for those in managerial and professional roles, reflecting higher average earnings.
Affordability is most stretched for people working in sales and customer service roles and in elementary occupations such as cleaners, couriers and labourers, where typical mortgage payments would account for around 50% of take-home pay.
ACROSS THE UK
Regionally, affordability improved across most of the UK over the past year, with the exception of Northern Ireland, where strong house price growth led to a deterioration.
London saw the largest annual improvement for the second year running, although it remains by far the least affordable region overall.
The North, Yorkshire and the Humber, and Scotland remain the most affordable areas, with mortgage payments slightly below their long-run averages.
Harvey adds: “We expect housing market activity to strengthen a little further as affordability continues to improve gradually via income growth outpacing house price growth and a further modest decline in interest rates.”
OUT OF REACH
Nathan Emerson, CEO of Propertymark, says: “While it’s encouraging to see affordability improving and first-time buyer activity picking up, this report underlines that homeownership remains out of reach for many, particularly those on lower and middle incomes.
“The fact that a typical first-time buyer still needs close to six years to save for a 10% deposit shows just how significant the deposit barrier remains, especially in London and the South of England.
“Regional and occupational disparities continue to shape who can realistically buy a home.
“Too many buyers are still reliant on financial help from family and friends, and this risks entrenching inequalities between those with access to support and those without.”
JOINED-UP APPROACH
And he adds: “To sustain and broaden access to homeownership, we need a joined-up approach that includes boosting housing supply, particularly of genuinely affordable homes, alongside targeted support for first-time buyers.
“Improving affordability is a step in the right direction, but it must translate into fairer access to housing across all regions and professions.”
CONFIDENCE IS KEY
Tom Bill, Head of UK Residential Research at Knight Frank, says: “Improved affordability is like a planning system incentive – it’s only positive for the housing market on paper.
“Confidence is the key missing ingredient and although it is recovering after the Budget, the market appears to need a demand-side shot in the arm as the economy struggles to grow and Westminster politics remains volatile.
“We expect low single-digit UK house price growth this year, primarily based on lower mortgage rates.”
BUYER INCENTIVES
James Nightingall of HomeFinder AI says: “January is seeing an evident return in buyer confidence whereby first-time buyers are already showing a similar level of motivation to last year.
“Some even save up a larger deposit to jump the property ladder and purchase a house as their first home.
“An increasing number of developers are offering incentives or lower their asking price which should also help more people make the step towards homeownership this year.”
