Latest Lloyds research reveals housing ladder becoming more accessible across most UK regions
First-time buyers face an easing of financial pressure following a combination of falling interest rates, income growth and subdued property valuations, according to recent analysis by Lloyds Banking Group.
The property price-to-earnings ratio for newcomers to the housing market has contracted to 5.9 times average earnings from 6.2 a year earlier. This reflects a typical purchase price of £237,518, representing a 2.4% increase, whilst average earnings have risen to £40,021, up 6.2%.
The threshold now sits at its most accessible level since the final quarter of 2015, when it also registered at 5.9.
Monthly mortgage payments for first-time buyers have climbed marginally by 0.1% to £1,087 over the same period. The advance in underlying property costs has been offset by declining mortgage interest rates. The average five-year fixed rate on a standard first-time buyer mortgage—calculated on a 30-year term with a 10% deposit—has fallen from 4.7% to 4.5%.
When measured as a proportion of monthly income, mortgage repayments have receded from 34.6% to 32.6%, the lowest share recorded since mid-2022, prior to the sharp rate rises that followed.
"Buying your first home is still a big challenge, but things are moving in the right direction," said Amanda Bryden (pictured right), head of mortgages at Lloyds. "Lower mortgage rates, stronger wages and slower house price growth mean it's becoming a little easier to get on the ladder – the best it's been for several years.
"Big national numbers often make the headlines, but the reality is that the housing market can look very different from one town to the next. If you're searching for your first home, being flexible on location can really help – sometimes moving just a few miles from your preferred area can unlock much better value."
Rental sector continues to grow more expensive
The rental market has experienced substantial cost inflation, with monthly payments increasing 5.5% to an average of £1,346. Despite this acceleration, the proportion of income devoted to rent has remained fairly static at approximately 40% owing to wage expansion across the economy.
Renting now costs approximately £259 per month more than typical mortgage payments for those purchasing their first property—a gap that has widened by roughly one-third over the past 12 months.
For those able to accumulate a deposit, homeownership increasingly represents a more economical option than renting.
Joint borrowing arrangements prevalent
The purchasing capacity of many first-time purchasers benefits considerably from joint applications, with family members, partners or friends pooling incomes to strengthen their borrowing position. Data indicates that 62% of first-time buyers now proceed as joint applicants.
UK Finance figures show that the average household income declared in first-time buyer mortgage applications stood just above £65,000 in the previous year, yielding a property price-to-household income ratio of approximately 3.7 and mortgage costs representing roughly 20% of combined income.
Significant regional disparities persist
While affordability has generally improved nationally, the picture varies considerably across different parts of the UK. Greater London (9.3), the South East (7.3), the East of England (7.0) and the South West (6.2) have all registered the most marked improvements in the property price-to-income ratio for first-time buyers, each falling by 0.4 over the year. These regions nevertheless retain the distinction of being the most costly in which to purchase property.
The North East emerges as the most accessible destination for first-time buyers, presenting a ratio of 3.9, a marginal increase from 3.8 previously. Property values in this region have climbed by approximately 10% – outpacing income growth of 7%, which represents the strongest expansion recorded anywhere in the UK. Mortgage payments account for 22% of income in the North East, in sharp contrast to the 51% figure for Greater London.
Scotland represents the next most affordable jurisdiction, with a ratio of 4.0, unchanged from last year. Northern Ireland registers a ratio of 5.1, up 0.2 from the previous year, whilst Wales stands at 5.3, down 0.1 year-on-year.
Inverclyde leads affordability rankings; Chelsea remains most expensive
Across the broader housing market, the national property price-to-earnings ratio has improved from 7.8 to 7.5. This calculation is based on a typical property valued at £298,521, up 1.9% during the year, alongside the aforementioned income growth of 6.2%.
Inverclyde on Scotland's west coast tops the affordability rankings with a ratio of 3.4, followed by Kingston upon Hull in Yorkshire and the Humber at 3.5. Kensington and Chelsea ranks as the least affordable local authority, recording a ratio of 17.7, with Elmsbridge in the South East second at 16.6.
The Cotswolds achieved the most significant improvement in affordability, with its ratio declining from 12.0 to 9.6, driven by a contraction in property values. Staffordshire Moorlands in the West Midlands experienced the greatest deterioration, with its ratio rising from 5.7 to 6.3 as properties became more costly.
"Buying a home is one of the biggest financial decisions most of us will ever make," Bryden said. "It's not just about saving money compared to renting, owning a property means building equity and creating a more secure financial future.
"If saving for a deposit feels daunting, start by speaking to a mortgage expert. They can help you work out what's affordable and guide you through the options, including low-deposit mortgages that let you buy with as little as 5% down."
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
