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UK House Prices Remain Unaffordable Despite Rising Wages, Nationwide Reports

The Digital Artisan

Jul 1, 2024 — 2 min read

UK Housing Market Struggles with High Prices

Nationwide, the UK's largest building society has reported the persistent unaffordability of houses for many households in the UK. This unaffordability exists despite a positive trend in wages rising above inflation for the typical earner. Even with the average UK wage increasing, the inflating housing market and high mortgage rates are challenging homeownership for many.

June's Housing Price Metrics

It was observed that house prices had risen slightly in June, possibly due to the impact of higher mortgage costs, with a 1.5% annual increase compared to May's 1.3%. However, the prices are still about 3% below the record high set in the summer of 2022. In June, the average house price in the UK stood at £266,064, according to Nationwide.

Historically High Prices with High Borrowing Costs

Facing 14 consecutive interest rate rises from the Bank of England, UK households experienced a fall in house prices last year. Despite this decline, house prices are still at historically high levels, relative to earnings. Though prices returned to growth earlier this year, the persistent higher borrowing costs and unaffordability of houses keep constraining market activity.

Rising Costs Versus Average Pay Growth

Nationwide reports that mortgage rates are still well above the record lows of 2021. These escalating costs have outpaced the benefits derived from stronger levels of average pay growth seen in recent months. In fact, a borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would expect to pay a monthly mortgage equivalent to 37% of their take-home pay – well above the long-run average of 30%.

Housing Market Activity on the Slowdown

Recent figures from the Bank of England reveal a slowdown in the UK’s housing market activity. In May, people borrowed £1.2bn of mortgage debt, a decrease from April's £2.2bn. Additionally, net mortgage approvals for house purchases slightly fell from 60,800 in April to 60,000 in May. This slowdown suggests an ongoing struggle in the UK's housing market, with house prices remaining unaffordably high for many households.

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