An average London home now costs 13.9 times the typical household income, according to the latest figures from the Office of National Statistics (ONS).
The data, which looks at the financial year ending in 2022, records median London house prices as £510,000 and annual income as £36,800.
Only the top 10 per cent of London households could afford a ‘median-priced’ home in the capital with 5.5 years of income, according to the ONS. Average incomes for earners in this bracket would be around £92,000 a year.
Meanwhile, median-price London homes cost the the equivalent of 37.5 years of annual income for the lowest-earning households in the capital.
Buying power has taken a hit in recent months as the cost of living crisis bites and mortgage rates soar in response to successive interest rate increases by the Bank of England.
Housing Secretary Michael Gove used a speech in London to set out a range of planning reforms this week, while today Prime Minister Rishi Sunak ‘stepped in’ to tackle London’s housing crisis through a review of the London Plan which aims to identify new sites to build tens of thousands of homes across the capital.
According to Moneyfactscompare.co.uk, the average two-year fixed homeowner mortgage rate on the market is now 6.83 per cent and the average five-year fixed homeowner mortgage rate is 6.34 per cent.
House price to income ratios across the UK
Across England, the average house price of £275,000 in 2022 equated to 8.4 years of the typical income (£32,600).
Only the top 10 per cent of households in England could typically afford a home with fewer than five years of income in the financial year ending in 2022, according to the Office for National Statistics (ONS).
In Wales, the top 30 per cent of households by income could afford an average-priced home with fewer than five years’ worth of income and in Scotland and Northern Ireland the top 40 per cent could do this, the ONS said.
In Wales, the average house price-to-income ratio was 6.4, in Scotland it was 5.3 and in Northern Ireland it was 5.1.
In England, Scotland and Northern Ireland, affordability ratios improved slightly compared with the previous financial year. But in Wales, the affordability ratio worsened, from a ratio of 6.1 previously.
In the financial year ending in 2022, house prices averaged £275,000 in England, £185,000 in Wales, £170,000 in Scotland and £151,000 in Northern Ireland.
Incomes were typically £32,600 in England, £29,000 in Wales, £32,200 in Scotland and £29,600 in Northern Ireland.
Sarah Coles, head of personal finance at Hargreaves Lansdown said: “Now people are facing remortgaging at much higher rates, it’s going to be incredibly painful.
“Housing hasn’t been affordable since 2017, according to the ONS, and rampant price rises during the pandemic didn’t help. Lower mortgage rates helped people to stretch their finances to bigger loans.”
Coles added: “If you’re planning to buy in future, your best protection is to build as big a deposit as you can manage.
“It’s worth getting all the help you can from wherever it’s available – whether that’s from the bank of mum and dad, or by saving into a Lifetime Isa and getting a 25 per cent bonus of up to £1,000 a year from the Government.
“Nothing will make buying a property easy while affordability is so stretched, but the less you have to borrow to get you there, the less vulnerable you will be at a time like this.”
