Most and least affordable areas to live in Britain

It’s a well known fact that the average living cost has increased massively in the last couple of years. Not only is renting and living more expensive, but the cost of UK homes has been growing at a fast pace. In this short guide, we will discuss some of Britain’s most and least affordable areas to live in.

House price growth has been quite strong before the COVID-19 pandemic, with an average growth rate of 2% each year between 2018-2019. Since 2020, the growth has skyrocketed up to a whopping 7.4%. Studies have shown that the price of an average UK home has increased by 0.28% from January to March 2022 – and the worst part is, they will carry on increasing as the year goes on.

The very high demand for housing is keeping the prices high with an average cost of £275,400. This means that buying a home in the UK will typically set you back by more than EIGHT times according to the average annual earnings. With that being said, there’s some good news. House prices differ across the country, meaning that some cities and regions are more affordable than others. 

Most affordable areas in Britain

According to Halifax’s new findings, here are the most affordable areas to live in Britain. This data is based on a price-to-earnings ratio taken from 2021. Starting with Londonderry, as the cheapest, it held this position for the third year in a row.

In the West Midlands, the cheapest city to buy a house in is Hereford, falling 20th on the list. Which comes right after Stoke-on-Trent in Staffordshire. 

Least affordable areas in Britain

In the last year, house prices have gone up by 10.3% all around Great Britain. With areas such as Kensington and Chelsea being in the top, some properties are even coming close to the £1m price range. According to Halifax’s data from last year, here are some of the least affordable areas to live in Britain:

As shown above, the price-to-earnings ratio in the UK has increased steadily. After sitting at 5.6 between 2011-2013, the ratio has increased for eight years in a row. Of course, wages in big cities tend to be bigger than in rural areas. New studies have shown that many citizens from big cities have relocated to the countryside during the pandemic. This helped push up the prices of homes there. 

London has been outside of the top five least affordable cities for the first time in 6 years. It’s affordability has significantly improved. Currently, Bromley is the most affordable borough in London. Although, it’s house price to earnings ratio is 7.4, it’s still not quite as expensive as most areas in the capital. 

What about first-time buyers?

Of course, first-time buyers are also facing many difficulties when trying to get on the property ladder. And with the prices of houses being higher than ever and still increasing, new homeowners might be struggling more than usual to save for a deposit. 

Halifax’s most recent review revealed that the average first-time buyer age is 32. This has changed over the past few years, as it used to be 29. First-time buyers are struggling with gathering big deposits, and it now takes much longer to save up. 

Even though it’s possible to get a mortgage with a 5% deposit, you must remember that the bigger your deposit, the better your chances are of getting a loan and overall deals. Especially if you are buying into a more expensive area.

What are the most affordable cities in Britain for first-time buyers?

Nationwide Building Society has carried out an affordability report. It revealed the best areas in Britain for purchasing your first home. They looked into the average price of new houses and average earnings of first-time buyers in 2021. Starting with East Ayrshire, Scotland, these are the cheapest cities to buy your first home:

According to data gathered from Zoopla and Rightmove, Wolverhampton is the cheapest city in the West Midlands for buying property. Out of the 450 houses currently on the market, the lowest priced one is around £20,000. 

Shortly after Wolverhampton, Sandwell falls next on the list. With the average house price standing at around £151,500. The most expensive city in the West Midlands for buying property is Solihull. The average house price in Solihull stands at an average of £284,300. 

Options for first-time buyers with little to no deposit

Generally speaking, if you are struggling to save for your first deposit, there’s many options you can look into for help. In 2021, most first-time buyers placed down an average of a 20% deposit, with most of them seeking help from the bank of mum and dad. However, not everyone has that privilege. Therefore, here is a list of things first-time buyers have access to, to help them get that dream home:

Help to Buy

This scheme helps first-time buyers purchase a new build home with a 5% deposit. You will be provided with an equity loan of up to 20% of the value of the property. You will only need to take out a mortgage for the remaining 75%. 

However, this scheme is for new built homes only. Which means, if you wish to buy an older house, you will have to use a private help to buy scheme rather than government backed.

First Home Scheme

This is a new scheme that was launched by the government in 2021. It was made to help first-time buyers get up to 30% off the market price of a new build home. It’s important to note that unfortunately not all new build homes are available under this scheme. Priority is offered to certain individuals. This could be keyworkers or new parents, so make sure to check the rules with your local council.

Guarantor Mortgages

A guarantor mortgage is essentially a trusted family member or friend using their own property as collateral. It’s a good option if you’re struggling with affordability and makes you look a lot more trustworthy to lenders. Make sure to do your research and familiarise yourself with the criteria first.

Shared Ownership

This specific scheme allows first-time buyers to buy a part of a leasehold property, then pay rent on the remaining amount. These are usually owned by a housing association. This kind of scheme is pretty pricey since you are paying mortgage, rent and other service charges. 

Mortgages with high borrowing caps

Usually, mortgage lenders will offer up to 4 and a half times your annual income. In some cases you may be able to borrow more, depending on things such as your credit score. Some banks may offer more but it depends on many factors. Check your eligibility with a mortgage broker.

In conclusion

It’s not easy to buy your first home anymore. Anyone who is looking to buy a property knows the challenges that lie ahead. The cost of houses and living has increased and rent is rising rapidly, no matter the area. Mortgage lenders are tightening affordability lending criteria which means you may need a bigger deposit to get accepted.

Best thing to do is to start saving as soon as possible. Easier said than done – however, your future self will be very grateful. Read and stay up to date with research and studies on most and least affordable areas to live. Speak to lenders, familiarise yourself with their criteria and look up different mortgage lenders’ deals. The sooner you start, the better. It’s a massive step into securing your dream home, and giving yourself a more stress free future. 

Talk to a Promise Money adviser for more details

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