Just 12.1% of potential first-time buyers can afford the average first home in their local area despite an improvement in headline housing affordability, according to Skipton Building Society.
The lender says falling house price-to-income ratios do not tell the full story for aspiring homeowners struggling with deposits, rents and everyday living costs.
Its warning follows Lloyds analysis showing the average UK home now costs 7.3 times average earnings, down from 7.6 times and the lowest ratio for 11 years.
The improvement has largely been driven by earnings growing more quickly than property prices.
FIRST-TIME BUYER BARRIERS
Charlotte Harrison (main picture), Chief Executive Officer of Homes at Skipton Building Society, says: “It’s encouraging to see the gap between house prices and earnings continuing to narrow, with wage growth helping to improve affordability on some measures.
“However, affordability remains a significant challenge for many aspiring homeowners. House price-to-income ratios are only one part of the picture.
“For many would-be first-time buyers, the biggest challenge remains raising a deposit while managing the cost of renting and everyday living expenses.”
Skipton Group’s latest Home Affordability Index finds just 12.1% of potential first-time buyers can currently afford the average first home in their local area.
More than 40% of aspiring first-time buyers are also spending over 45% of their income on essential housing costs, reducing their ability to build a deposit.
AFFORDABILITY GAP
Harrison adds: “The direction of travel is positive, but there is still more to do.
“Continued innovation from lenders, supportive policy and increased housing supply will all have an important role to play in helping more people achieve sustainable home ownership.”
