Dec

Rising rents contrast with better affordability for first-time buyers

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Rising rents contrast with better affordability for first-time buyers

First-time buyer affordability has improved over the last year, but rent costs continue to rise, according to a new report.

Data from Lloyds Bank reveals the typical first-time buyer property price is now 5.9 times average earnings, down from 6.2 last year.

The report shows a typical first property now costs £237,518, up 2.4% over the past year, while average incomes have increased 6.2% to £40,021.

Rent costs have increased sharply

According to the findings, typical monthly mortgage costs for first-time buyers have risen by just 0.1% over the last year to £1,087. This is due to lower interest rates offsetting modest increases in property prices.

As a proportion of income, average monthly mortgage costs have fallen from 34.6% to 32.6%, the lowest figure since mid-2022.

However, rent costs have increased sharply over the last year, rising 5.5% to a monthly average of £1,346.

Renting is now, on average, £259 per month more expensive than a typical first-time buyer mortgage, a difference that has grown by over a third (36%) over the last year.

Despite this, strong wage growth has kept rental payments as a percentage of income stable at around 40%.

Buying your first home is a big challenge

Amanda Bryden, head of mortgages at Lloyds, says for those who can overcome the challenge of raising a deposit, owning a home can often be more affordable than renting. She said:

She said: “Buying your first home is still a big challenge, but things are moving in the right direction. 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.”

Scotland accounts for many of the most affordable local areas in Britain

The report also reveals that across the housing market, including existing homeowners as well as first-time buyers, the UK property price to earnings ratio has fallen from 7.8 to 7.5 over the last year.

This is based on a typical property costing £298,521, up 1.9% over the last year, while average incomes are up 6.2% to £40,021.

Scotland accounts for many of the most affordable local areas in Britain. Inverclyde on the west coast tops the list with a property price to earnings ratio of 3.4. It is followed by Kingston upon Hull in Yorkshire and the Humber, with a ratio of 3.5.

Kensington and Chelsea is the least affordable local area, with a property price to earnings ratio of 17.7. Next comes Elmbridge in the South East at 16.6.

The Cotswolds saw the biggest improvement in affordability over the last year, with the property price to earnings ratio falling from 12.0 in 2024 to 9.6 this year, driven by a fall in the value of the average home.

The biggest deterioration in affordability was recorded in Staffordshire Moorlands in the West Midlands, with the ratio increasing from 5.7 to 6.3 as a result of rising property prices.

The post Rising rents contrast with better affordability for first-time buyers appeared first on Property118.

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