Halifax predicts further declines in house price to income ratios

Housing affordability is improving but the benefits are being offset by high mortgage rates, Halifax claims.

Analysis by the lender found the house price to income ratio has dropped from a record high of 7.3 last year to 6.7 due to falling values and high wage growth.

The average house price to income ratio has fallen in every nation and region over the last year, with the exception of Wales, where it rose from 6.7 to 6.8, Halifax said.

London remains by far the most expensive place in the country to buy a home, with an average property price of £533,057. 

Based on regional earnings, this puts the house price to income ratio at 9.3 compared with 10.0 a year ago, the highest of any region. 

In contrast, the North East of England remains the most affordable UK region in which to buy a home, with an average house price of £168,240 and a house price to income ratio of 4.9. 

Along with Scotland, it is the only part of the UK with a ratio lower than 5.0, having fallen from 5.2 over the last year, Halifax said.
However, mortgage rates have increased by around a fifth over the past year, limiting any benefits for buyers.

Kim Kinnaird, mortgages director for Halifax, said: “We don’t yet know what the ‘new normal’ looks like for mortgage rates and house prices over the longer-term. But we expect the market to rebalance as both buyers and sellers adjust their expectations to reflect higher costs and lower demand.

“It’s likely the gap between average earnings and property prices will narrow over time, which will be welcome news to first-time buyers in particular, especially in areas which could offer better value for money.”