Homebuyers across the UK are facing a potential £ 1,500-a-year increase in mortgage repayments as interest rates hover near three-year highs, driven by the ongoing US-Iran conflict and rising energy costs.
New research from Nationwide Building Society highlights the most affordable areas for first-time buyers.
Inverclyde, which includes Greenock and Port Glasgow, has emerged as the cheapest area, with property prices averaging around £100,000, or just 2.3 times local earnings.
In contrast, areas such as Kensington and Chelsea in London, as well as Oxford and Cambridge, remain the least accessible for aspiring homeowners, despite recent declines in average property values.
Andrew Harvey, Nationwide’s senior economist, stated, “Our recent Affordability Report showed that affordability has improved across all regions in Great Britain over the past year, helping to support first-time buyer activity.”
In other regions, Burnley is the most budget-friendly town in the North West, while Hartlepool leads in the North. Kingston upon Hull is the most affordable in Yorkshire and the Humber, with house prices at three times local earnings. In the East Midlands, West Lindsey in Lincolnshire is the cheapest, while Great Yarmouth holds the title in East Anglia. Gosport is the most accessible town in the Outer South East, and Swindon offers the best value in the South West at 4.8 times earnings.
Overall, approximately seven out of ten local authorities across Britain have experienced improvements in affordability over the past year. London recorded some of the most significant gains, particularly in areas where property prices have fallen relative to rising incomes. For instance, Norwich saw its price-to-earnings ratio drop from 5.4 in 2024 to 4.3, and Welwyn Hatfield decreased from 7.6 to 6.6, reflecting both stronger wages and softer house prices.
Despite these improvements, saving for a deposit remains a challenge. A 10 per cent down payment on a typical first-time buyer home ranges from £10,000 to £25,000 in more than half of UK local authorities.
This warning comes amid growing concerns over mortgage costs, as the Bank of England’s Monetary Policy Committee voted to hold the base rate at 3.75 per cent, citing uncertainty stemming from the ongoing conflict in the Middle East. Analysts caution that lenders may increase borrowing costs in the coming months, potentially negating the recent improvements in mortgage affordability.
Governor Andrew Bailey emphasised that rate cuts are not forthcoming and assured that the Bank is “ready to act as necessary” to control inflation. The Bank now predicts that consumer prices will rise to 3.5 per cent, abandoning the goal of returning to a 2 per cent target this spring.
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