Full-time employees in England can now expect to spend more than eight times their annual earnings when buying a home, research has revealed.
The housing affordability report from ONS looks at data on house prices and earnings to calculate annual affordability ratios.
While the 8.3 is down from the 9.1 times earnings figure from the previous year’s survey, the 2021 figures have been attributed to a sharp increase in prices due to changes in stamp duty land tax and land transaction tax.
The latest figures therefore mark a ‘return to the long-term trend’ of a widening gap, the report says. In that respect, housing affordability has worsened in every area of England and Wales over the last 25 years.
While earnings have doubled since 1997, house prices have increased four-and-a-half times. And it’s house prices that have been cited as the main cause of the change in affordability.
Across England and Wales in 2022, housing affordability improved in 235 areas, worsened in 89 and stayed the same in the remaining six. The most affordable areas in 2022 (where the ratio was less than five times earnings) were in the North West, Wales and the North East.
The least affordable area remained Kensington and Chelsea where the ratio rose to an eye-watering 38.4, reflecting high house prices but not proportionately higher earnings.
Reacting to the news, The Mortgage Lender says the affordability gap is ‘widening to a chasm’.
Chief commercial officer Steve Griffiths comments: “House prices are showing signs of defying market slowdown expectations, and with rising living costs, high inflation and interest rates, the affordability gap is widening to a chasm for many. In fact, our own research found that not being able to afford to get onto the property ladder was a top concern among 30% of renters.
“Specialist lenders can play an important role here in supporting consumers with their property aspirations. Going beyond just supporting those with blips in their credit scores, they can be instrumental in casting a wider net when it comes to assessing affordability. And with an expected 1.4 million households due to renew their fixed-rate mortgage this year, they have a real opportunity to help borrowers in their property ambitions.”
Hargreaves Lansdown head of personal finance Sarah Coles adds: “Affordability calculations reveal just why rising rates have taken such a toll on buyer confidence. With the average full-time employee in England spending 8.3 times their annual income in order to buy a typical home, we’re being forced to take on ever-larger mortgages. It means a small change in mortgage rates has a far larger impact on our monthly payments.”
