Over the past year, housing affordability improved in 70% of UK local authority areas — the first meaningful shift in the right direction since before the pandemic. That doesn’t mean buying a home has become easy, but it does mean the gap between what first-time buyers earn and what they need to borrow has started to narrow in most parts of the country. I’ve been writing about the UK property market for long enough to notice a pattern: every time affordability metrics improve, the conversation shifts from “can I ever buy?” to “how do I actually make this work?” That’s the question this article is built around.
The housing affordability index is the tool that’s supposed to tell you whether you can afford to buy. But as I’ve seen time and again, the standard index — the one most people stumble across first — answers a question that doesn’t match reality for most first-time buyers. It assumes a 20% deposit, ignores council tax, insurance, and maintenance, and treats the “typical” buyer as someone who doesn’t carry debt. That’s not most people I hear from. Here’s what you actually need to know.
What the housing affordability index actually measures — and what it misses
The most widely cited version, from the National Association of Realtors in the US, calculates whether a household earning the median income can qualify for a mortgage on a median-priced home. It uses a 30-year fixed rate, a 20% down payment, and nothing else. That’s it. No council tax, no insurance, no HOA fees, no maintenance. The index showed homes were “affordable” through most of the 2000s housing bubble — which tells you everything about its limitations. Since mid-2022, the index has hovered around 100, the baseline of affordability, yet existing sales volumes have stayed well below long-term norms. In practice, that means housing is likely less affordable than the index suggests.
Oxford Economics offers a more realistic alternative. Their index adds property taxes, homeowners’ insurance, and HOA fees into the calculation. The difference is stark: using their model, affordability has fallen sharply since the pandemic, and the income threshold to qualify for a purchase has nearly doubled in just five years. What I’d do if I were starting out today is ignore the headline national index entirely and build my own version using local prices, my actual deposit, and real ongoing costs. A comparison of building societies versus banks can help you find a lender whose affordability criteria match your situation, not a theoretical one.
Why the gap between the index and reality matters for first-time buyers
Since 2024, about one-third of US households can afford to buy a home — down from nearly two-thirds five years ago. The UK picture is similar, though the numbers differ. The national house price-to-earnings ratio for first-time buyers now sits at 4.7x, which is actually below the 20-year average for the first time since 2020. That sounds like good news, and in some ways it is. But the improvement is concentrated in specific areas. In 70% of UK local authority areas, affordability improved over the past year. That still leaves 30% where it got worse.
Consider a 22-year-old earning the median UK salary of £34,000. Without parental help and saving 15% of gross income, they’d need roughly 8 to 10 years to save a 10% deposit for an average-priced property. That’s not a calculation any standard affordability index captures. The index assumes you already have the deposit. It doesn’t ask how you got it.
In London, the situation is more extreme. The average FTB deposit exceeds £120,000. The average FTB property costs £472,000. London’s homeownership rate among under-35s has fallen below 30%, while rates in northern regions remain above 50%. If you’re buying in the North East, where the average FTB price is £139,000, the affordability calculation looks completely different. A national index lumps both scenarios together and gives you one number that’s useful to neither buyer.
What I tend to notice when readers write in is that they’ve checked a national affordability calculator, seen a green light, and then discovered their actual mortgage offer is far lower. That’s the index gap in action. If you’re in a region where prices are rising faster than incomes, the index will still show “affordable” as long as the median income keeps pace — but your personal income might not be the median. A comparison of rural versus city living costs can help you see which areas genuinely fit your budget, not just the national average.
Where first-time buyers get tripped up by the affordability index
The most common mistake is treating the index as a personal affordability check. It isn’t. It’s a macroeconomic indicator. Here are the specific errors I see repeatedly.
Assuming the 20% deposit assumption applies to you
The standard index assumes a 20% down payment. Most first-time buyers don’t have that. The average FTB deposit nationally is £60,000–£64,000, which works out to roughly 10–12% of the purchase price. In London, the average deposit exceeds £120,000 — still well short of 20% on a £472,000 property. The Mortgage Guarantee Scheme supports 95% loan-to-value mortgages on homes up to £600,000, which means you can buy with a 5% deposit. But the index won’t tell you that. It assumes you’re putting down 20%, so it underestimates your monthly payments and overestimates your affordability.
Ignoring the stamp duty threshold change
Since April 2025, the first-time buyer stamp duty nil-rate threshold dropped from £425,000 to £300,000. If you’re buying a property above £300,000, you’ll pay stamp duty on the portion above that threshold. That’s an upfront cost the index doesn’t include. For a £350,000 purchase, you’d owe stamp duty on £50,000 — roughly £2,500. That’s money you need before you complete, not spread across a mortgage. A guide to the escrow process for buying a house explains where these costs sit in the transaction timeline.
Overlooking the collapse in under-25 buyers
Only 6% of first-time buyers are under 25, down from 23% in the 1990s. That’s not because young people don’t want to buy. It’s because the deposit hurdle and income requirements have structurally excluded them. The index doesn’t capture this because it measures the median buyer, not the youngest one. If you’re under 25 and looking at the index, it will tell you the market is “affordable” for a typical buyer — but you’re not the typical buyer. You’re competing in a market where the average buyer is 33.9 years old, has a decade more savings, and likely has dual income.
Relying on a single national figure
The national house price-to-earnings ratio of 4.7x is below the 20-year average for the first time since 2020. That’s genuinely positive. But it masks enormous regional variation. In the North East, the ratio is far lower. In London, it’s far higher. If you live in a region where affordability improved, the national figure understates your position. If you live in a region where it worsened, the national figure overstates it. The only number that matters is the one for your local authority area.
→ Scroll right to see all columns
| Region | Average FTB Price | Average FTB Deposit |
|---|---|---|
| London | £472,000 | £120,000+ |
| South East | £299,000 | £60,000–£64,000 |
| East of England | £277,000 | £60,000–£64,000 |
| South West | £249,000 | £60,000–£64,000 |
| West Midlands | £210,000 | £60,000–£64,000 |
| East Midlands | £207,000 | £60,000–£64,000 |
| North West | £186,000 | £60,000–£64,000 |
| Wales | £181,000 | £60,000–£64,000 |
| Yorkshire & Humber | £179,000 | £60,000–£64,000 |
| Scotland | £155,000 | £60,000–£64,000 |
| North East | £139,000 | £60,000–£64,000 |
If you’re in a region where the deposit figure feels out of reach, a review of homeownership grants can uncover schemes you might not know exist. The data shows that 390,000 first-time buyers completed purchases in 2025 — an 18% increase on 2024. People are finding ways through. The question is whether you’re using the right map.
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How to build your own affordability check — and actually use it
The standard index won’t tell you whether you can afford to buy. But you can build a personal version that will. Here’s how.
Calculate your real monthly housing cost, not just the mortgage
Start with the mortgage payment on the property you’re actually looking at, using a realistic deposit (5–10%, not 20%). Add council tax, buildings insurance, and a maintenance allowance of roughly 1% of the property value per year. If the property is a flat, add the service charge and ground rent. If it’s in a new-build estate, check whether there’s an estate management charge. The Oxford Economics index includes property taxes, insurance, and HOA fees for a reason — those costs can add 30–40% to your monthly housing bill. A pros and cons breakdown of buying off-plan can help you spot hidden service charges before you commit.
Use the Lifetime ISA bonus to close the deposit gap
The Lifetime ISA provides a 25% government bonus on savings toward a first home, up to £4,000 per tax year. That’s a maximum £1,000 bonus per year. If you’re 22 and saving for a deposit, maxing out your LISA for five years gives you £25,000 in savings plus £5,000 in government bonuses — £30,000 total. That’s roughly half the average FTB deposit outside London. The index doesn’t factor this in because it assumes you’re saving without help. You’re not. The scheme is still open and still effective.
Stress-test your affordability against rising rates
Mortgage rates have nearly doubled since 2021. The standard index uses a single rate. You should test your budget against a rate 2% higher than your initial offer. If you can still afford the payments at that level, you have genuine breathing room. If not, you’re buying at the edge of your capacity. The guide to navigating property chains explains how delays can push your mortgage offer past its expiry date, forcing you to reapply at a higher rate — so this stress test isn’t theoretical.
Look at the forecast, not just today’s numbers
Oxford Economics expects home affordability to continue declining over the next decade. Their models show the index reaching 100 — the level at which homes are generally considered affordable — by 2033 only if home prices remain flat and mortgage rates drop by about 50 basis points. If rates don’t drop, that target moves to 2036. If historic trends continue, the index stays below 80 for the next 10 years. That doesn’t mean you shouldn’t buy. It means you should buy with the expectation that affordability will not improve on its own. Buy because you can afford the payments now, not because you expect things to get easier later.
- 1Get your local price dataUse the table above to find your region’s average FTB price. Then check Land Registry data for your specific local authority — the national figure is a starting point, not a target.
- 2Calculate your real depositInclude savings, gifted deposits, and the Lifetime ISA bonus. Don’t assume 20% — use your actual figure. The Mortgage Guarantee Scheme supports 95% LTV, so 5% is a valid starting point.
- 3Add all ongoing costsCouncil tax, buildings insurance, maintenance (1% of property value per year), service charges, ground rent, and estate management fees. This is the step most people skip.
- 4Stress-test at +2%Recalculate your monthly payment at a rate 2% higher than your initial mortgage offer. If you can still afford it, you have genuine headroom. If not, you’re buying at the limit.
If you’re unsure about any of these calculations, speaking to a financial advisor can help you stress-test your numbers against your actual income and outgoings. The cost of a single session is far less than the cost of overextending on a purchase.
Frequently asked questions about the housing affordability index
Does the housing affordability index apply to UK buyers? ▾
What is a good housing affordability index score?
Why does the index show affordability when I can’t afford to buy?
How do I calculate my personal affordability index?
Will affordability improve in the next five years?
What’s the best way to track affordability in my area?
The housing affordability index is a useful starting point, but it’s not a personal buying guide. The gap between what it measures and what you actually need is where most first-time buyers get stuck. Build your own calculation using local prices, your real deposit, and all the ongoing costs. That number — not the national index — is the one that tells you whether you’re ready.
If this was useful, you might also want to read Tips for buying a home in the UK near schools.
Sources and Further Reading
Understanding vacancy rates when buying in the UK — Explains how local vacancy data affects your buying decision and price negotiation.
First-time buyer statistics UK 2026. Shaded Canvas, 2026.
Deciphering the data about housing affordability. The Real Deal, 2026.
Housing affordability: understanding the role of the single-family rental industry. Forbes Business Council, 2026.
