The gap between earnings and house prices has fallen to an 11-year low, but higher mortgage costs continue to squeeze buyers.
The average UK home now costs 7.3 times median earnings, down from 7.6 in 2025 and at its lowest point since 2015, according to new research by Lloyds Bank.
Lloyds data showed the average UK house price rose by 0.5% to £299,131 between the second quarter (Q2) of 2025 and Q2 2026, while median earnings went up by 4.5% to £40,790 over the same period.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
But higher mortgage rates resulting, in part, from the conflict in the Middle East are counteracting this trend, meaning owning a home is still a challenge for many.
Latest Videos FromMoneyWeek
According to data firm Moneyfacts, the average two-year fixed-rate deal is 5.93% as of 1 October, up from 4.83% on 27 February, the day before the US and Israel began strikes on Iran, which led to global oil prices surging.
Lloyds suggested the average monthly mortgage payment rose from £1,100 to £1,157 between Q2 2025 and Q2 2026.
Andrew Assam, mortgages director at Lloyds, said: “There are some encouraging signs for people looking to buy a home. Wages have continued to rise while house prices have remained relatively stable, helping to narrow the gap between earnings and house prices.
“However, affordability remains stretched for many households.”
Affordability improves for first-time buyers
Incomes relative to house prices have improved for first-time buyers, according to Lloyds.
The bank said the average property price for first-time buyers rose by 0.3% to £239,681 between Q2 2025 and Q2 2026.
The average UK first home now costs 5.9 times median earnings, down from 6.1 in 2025. This is the lowest the figure has been since 2015.
Lloyds acknowledged, though, that saving for a deposit still remains a significant challenge for first-time buyers, who typically need to save around £24,000 to get on the ladder with a 10% deposit.
Higher borrowing costs are also an issue, with the average monthly repayment rising from £1,100 to £1,150 between 2025 and 2026.
According to Lloyds’s figures, the average first-time buyer mortgage payment now accounts for around 34% of income compared with 41% for those renting.
Prime minister Andy Burnham has made getting people on the property ladder for the first time a key priority, recently announcing the Your First Home scheme.
The equity loan scheme means first-time buyers will be able to get a home with a 2.5% deposit, backed up with a 20% loan from the government.
Affordability pressures persist in London and the South East
London and the South East remain the least affordable places to buy a home based on local house prices relative to median incomes, Lloyds’s research found.
The house price to income ratio fell from 10.9 to 10.3 in Greater London and from 9.7 to 9.1 in the South East between 2025 and 2026 – meaning both areas became more affordable.
Areas where house prices tend to be lower generally saw less dramatic improvements in affordability.
The house price to income ratio in the North East, for example, dropped from 5.1 to 5.0, while in the North West it fell from 6.5 to 6.3 and 6.0 to 5.8 in Yorkshire and the Humber.
Northern Ireland was the only UK region where homes became less affordable between 2025 and 2026.
House prices rose by 7.4% in the region compared to a 3.7% rise in median earnings, meaning the average house now costs 6.0 times median earnings versus 5.8 times last year.
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “The house price gap between London and the rest of the country continues to narrow as more affordable parts of the country see stronger growth.”
Bill believes that this dynamic will eventually see demand gravitate back towards London and South East England, re-starting the housing cycle again.
“The recent mortgage rate spike has only just begun to hit, which will keep a lid on activity and prices for the rest of this year, something that will affect highly-leveraged borrowers, like first-time buyers, hardest,” he added.
The cheapest areas to buy a home relative to earnings are in Scotland, according to Lloyds’s research. In Inverclyde and Aberdeen, the average home costs 3.5 times earnings in both areas as of Q2 2026.
The most expensive areas to buy a home relative to earnings are in Elmbridge in Surrey and Kensington and Chelsea, London. Buyers in these areas need to earn 17.4 and 17.3 times the median UK salary respectively to buy the typical home there.
Swipe to scroll horizontally
Most and least affordable local areas by region
Region
Local area
Property price
Price to income ratio
East Midlands
Mansfield
£183,032
4.9
East Midlands
Malvern Hills
£328,261
8.8
Eastern England
Boston and South Holland
£181,885
4.5
Eastern England
St Albans
£568,940
14.1
Greater London
Barking and Dagenham
£322,675
6.2
Greater London
Kensington and Chelsea
£895,893
17.3
North East
Middlesbrough
£139,678
3.9
North East
Northumberland
£230,176
6.4
North West
Blackpool
£141,550
3.6
North West
Trafford
£358,854
9.2
Scotland
Inverclyde
£146,030
3.5
Scotland
East Renfrewshire
£288,665
6.9
South East
Portsmouth
£216,713
5.2
South East
Elmbridge
£726,523
17.4
South West
Plymouth
£201,008
5.2
South West
Cotswolds
£403,153
10.3
Wales
Neath Port Talbot
£153,212
4.1
Wales
Monmouthshire
£300,079
8
West Midlands
Stoke-on-Trent
£172,917
4.5
West Midlands
Stratford-on-Avon
£347,085
8.9
Yorkshire and the Humber
Kingston upon Hull
£134,642
3.6
Yorkshire and the Humber
York
£302,747
8.1
Source: Lloyds Banking Group/Office for National Statistics (ONS)
India needs tax incentives for long-term insurance policies to counter the pull towards shorter-duration instruments, Anup Bagchi, MD & CEO of ICICI Prudential Life Insurance, said at NaBFID’s Infrastructure Conclave 2026. Bagchi noted a growing appetite for shorter liability instruments across the financial sector — bank deposits under three years have risen from 60-65…
The Insurance Regulatory and Development Authority of India (Irdai) on Wednesday proposed a phased reduction in the expenses of management (EoM) limits for insurers, with life insurers required to bring company-level EoM down to 15 per cent of gross direct premium income (GDPI) within two years and 12.5 per cent within five years. For…
The U.S.-Iran war is not going fantastically well for either side. President Trump has been unable to conduct the negotiations he had hoped for and reach a final deal over the Strait of Hormuz. And Iran’s military infrastructure—and a great deal of its economic infrastructure—have been reduced to rubble. Looming over the conflict is a…
The winner of the World Cup will hoist a trophy, receive championship rings for the first time and gain a lifetime of glory in what will be a defining moment in the country’s sports history. It’ll also lead to a significant payday. The World Cup winner earns $51 million. The second prize is $34 million. FIFA expanded…
