The most and least affordable places to buy a home

The places in the UK it’s easiest - and hardest - to afford a home on the a local salary have been named, with some unlucky people needing to find more than 27 times their annual income to afford a home near where they live

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Row of semi-detached houses in Oxford

London was the least affordable place to buy a house last year, with full-time workers forking out 12.52 times their average salary on a new home, according to the Office for National Statistics (ONS).

It was followed by the south east, requiring 9.57 times an average annual wage, and the east of England with workers paying 8.86 times their salary. 

The most affordable place was the North East of England, where a property will cost you 5.01 times your yearly salary. 

The north west, Yorkshire and the Humber, and Wales all required workers to pay 5.72, 5.83, and 5.84 times their annual wages respectively for a new home.

Across England, employees paid an average of 7.8 times their annual salary. In Wales it was 5.9 times and the ONS says these figures were similar in 2019.

Properties getting (relatively) cheaper in most areas, but not for most people

Earnings grew faster than house prices in nearly 60% of local authorities, according to the data.

In England earnings for full-time workers increased 3.5%, while average house prices rose 2.9%. By contrast, in Wales earnings rose 3.1% while house prices increased 3.5%. 

However, the ONS said overall housing affordability has worsened and most significantly in London. Within London the least affordable place to buy was Kensington and Chelsea, where workers would have to pay an average of 27.16 their annual salary for a new property. 

New build houses remained less affordable than existing houses in England and Wales. Workers in England could expect to spend 9.6 times their annual earnings on one (compared to 7.6 times on an existing property) and in Wales it was 8.2 times, compared to 5.7 times for an existing property.  

To calculate affordability, the ONS uses The Land Registry’s records of houses sold for 2020. 

For average wages, it uses a snapshot of data from April 2020. However, as this is two months after the start of the first coronavirus lockdown, it doesn’t include the impact this had on housing affordability.  

Sarah Coles, personal finance analyst for Hargreaves Lansdown, said: “The official figures show that buying a home of your own didn’t get any less affordable last year, but in reality clearly it did.

“These figures are designed to show average affordability around April, which misses the impact of the pandemic entirely. In reality, throughout the rest of the year, huge price rises helped push property prices even further out of reach.”

Recent problems in affording a home

Measures introduced last year have had a big impact on house prices.

The introduction of a holiday from the Stamp Duty Land Tax has seen house prices rising to historic highs. The latest data from the ONS shows that prices rose 7.5% in the year to January 2020, and are now an average of £266,532. 

The government’s 95% mortgages, another measure announced in the recent budget, are also likely to boost the housing market. These mortgages are for anyone buying a new home and allow them to do so with a 5% deposit. The government is backing the loans and the scheme is running until December 2022.

However, it’s unclear what will happen once the extension to the stamp duty holiday ends which will come at the same time as the furlough scheme is axed.

Sarah Coles added: “Even if you can get hold of a high loan-to-value mortgage, you need to seriously consider your position first. 

“The Office for Budget Responsibility expects unemployment to peak at 6.5% of the workforce at the end of this year - which is another 500,000 job losses. If you have any concerns over the security of your job, it might not be the best time to take on a hefty mortgage.

“There’s also the chance that the end of the stamp duty holiday and the furlough scheme will take some of the heat out of the market, so we could see prices falling. For those with very small deposits this raises the possibility of negative equity.”

How to boost your chances at getting a mortgage

If you want to cash in on the stamp duty holiday or simply buy a new home, here are five of the best ways to improve your chances of being approved for a mortgage.

  • Keep on top of your credit score - Any lender will need to look at your credit score so make sure it’s up-to-date and you’re regularly checking it for inaccuracies or errors.

  • Register to vote - It’s free to be on the electoral roll and lenders will check it to verify your ID.

  • Don’t apply for too much credit before your application - Every time you apply for credit a mark is left on your credit score. Try not to do this before applying for a mortgage as it can negatively affect your chances.

  • Never miss a payment - Missing a payment - be it a credit card or a personal loan - will leave a mark on your credit score that your mortgage provider can see. 

  • Get your spending in order - A mortgage provider will usually look at your regular spending so keep an eye on where your money is going and try to rein in any unnecessary spending.

The schemes to help you buy a home

There are several schemes available which can help you buy a home. They include the following: 

  • Help to buy Equity Loan - This allows first-time buyers to buy a new property with a 5% deposit and a loan of 20% of the property price. There is no interest to pay for the first five years and it’s only available in England. 

  • Lifetime ISA (LISA) - The LISA is open to anyone aged between 18 and 39 and they can save up to £4,000 a year in it. This is topped up by up to £1,000 from the government each year and the pot can either go towards a first home or retirement savings. 

  • Shared Ownership - If you buy a home through shared ownership, you pay both towards your mortgage and a reduced rate of rent to the landlord, which is usually a local council or housing association. You can then choose to increase the share of the amount you own up to 100% so you own the property outright.