Is UK Property Affordability Easing?

Is UK Property Affordability Easing?
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10 April 2024 – The end of March signals the culmination of the first quarter of the year. Increased buyer and seller activity marked the first few months of 2024.

Improvements in buyer confidence were also reported as more first-time buyers became optimistic about entering the property market.

However, March also recorded house prices falling for the first time in six months due to uncertainty surrounding interest rates. 

So, what does this spell out for property affordability?

Mortgage rates increase, and so does product choice

The upward trajectory of fixed mortgage rates in recent weeks has put concerns around affordability to the front of buyer’s minds again.

Between the beginning of March and April, the overall average two-year fixed rate increased to 5.80%. The five-year fixed rate also rose to 5.39% in the same period.

The average two-year fixed rate is higher than the 5.76% in March 2024, although both are lower than January’s. 

The Standard Variable Rate (SVR) is also at elevated levels,  hovering at 8.18%—the closest it has been to the peak of 8.19% in the last months of 2023. 

However, product choice is at a record level! At its highest level since February 2008, there are now 6,307 options available to borrowers. 

For the 90% loan-to-value (LTV) tier, the number of deals available rose to 774 for the second month in a row. It’s also hovering near the peak of 779 deals recorded back in March 2020. 

The 95% LTV tier mirrors the same sentiment. For the fourth month in a row, the number of deals has steadily increased to the current 335. It’s also not far off from its highest count of 347 in June 2022.

Additionally, a mortgage product stays in the market for an average of 22 days before being withdrawn. It’s a massive departure from 15 days in March 2024 to 12 days in July 2023 (the lowest ever on record).

More choice means borrowers are more likely to find a deal that suits them, increasing their chance of being able to buy a home. However, this doesn’t mean that affordability is getting better.

House prices dip, but property market may still be busy in coming months

House prices dip slightly in March

The recently published Halifax price index highlighted a 1% drop in house prices.

Despite this, annual house prices were still up by +0.3%, while quarterly house prices also saw a 2% growth. 

The March price dip currently halts the five-month momentum of price hikes. Sam Mitchell, CEO of Purplebricks, attributes this hiccup to an increase in mortgage rates at the beginning of the month. 

Despite this unusual slight decline in house prices in March, property prices have remained stable in the past few months. And industry leaders are honing in on the dropping inflation rate, increasing stock, and the spring boom, which all signal a potentially busy property market in the upcoming months. 

Listings and inquiries can also indicate property affordability. In that case, Propertymark’s reported 18% increase in new properties coming into the market is certainly good news.

The market is proving to be resilient in the face of ongoing economic challenges, and February’s mortgage approvals reached their highest levels since September 2022 thanks to activity levels starting to bounce back. Demand has remained steady since, with a strong showing over the Easter bank holiday weekend.

Nicky Stevenson, Managing Director at Fine & Country

It shows that sellers and buyers are more confident again. However, they are also price sensitive, which is why prices dropped in March rather than increasing. This shows that affordability is still a challenge.

Deposit requirements too high for buyers, and Bank of Mum and Dad

Exorbitant deposit requirements are keeping out most first-time buyers from the market. 

According to research from Legal and General, an average home catered towards first-time buyers is priced at £237,655. A 15% deposit would set back prospective buyers by £35,648.

So, a rising number of first-time buyers have no choice but to turn to the Bank of Mum and Dad. 

In fact, borrowing money from relatives is one of the top options for buying a home in this economy. In 2023, the Bank of Mum and Dad loaned a total of £8.14 billion to first-time buyers, which resulted in an estimated 318,300 sales. Furthermore, family contributions made it possible for 47% of buyers below 55 years old to purchase their own home. 

However, help from relatives does not even cover the whole deposit. First-time buyers will still have to fork out the remaining £10,048 to own a home. 

So high deposit requirements are making it apparent that buyers can not rely on family contributions alone. 

London’s average first-time buyer house price is £440,322, with a deposit of £66,048. The Bank of Mum and Dad covers an average of £30,200 in the capital, which means first-time buyers will need to save up for the remaining £35,848.

But it’s not the same story in other areas of the country where deposit requirements don’t cost an arm and a leg. 

For instance, in the North East the average first-time buyer home is priced at £134,621, with a deposit requirement of up to £20,193. Here the Bank of Mum and Dad is more likely to be able to cover the whole deposit.

Our Opinion

So what does all this tell us about property affordability in the UK? It’s still a challenge. Yes, the number of first-time buyers in the market in Q1 2024 was at a record high, but they are also spending less.

By choosing a smaller and therefore cheaper property, they are able to navigate the various challenges. Their mortgage repayments will be lower, because they need to borrow less. They also need a smaller deposit, which is probably one of the biggest difficulties for most first-timers.

We have seen that even help from family often doesn’t cover the whole amount. Property prices are just too high to be sustainable for the long-term.

And coupled with high mortgage rates, this is the perfect storm for many young people. If they are able to make it onto the property ladder, they have to adjust their expectations. And that’s what currently allows them to get into the market.

But if we do have the spring boom that industry insiders expect, prices are likely to rise again, making it more challenging still.


  • News Desk

    Our news desk team includes a qualified architect, a freelance journalist, and a fanatical property expert who has over 12 years experience in the industry.

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