The UK’s house price to income ratio has fallen to an 11-year low, from 7.6 to 7.3, as earnings continue to outpace house price growth, but mortgage cost increases remain a hurdle for many buyers, Lloyds has found.

The bank’s Affordability Review showed that the national average property price increased by 0.5% over the last year to £299,131, while average earnings rose by 4.5% to £40,790, narrowing the gap between house prices and earnings.

However, while house prices have become more affordable compared to earnings, higher interest rates mean average monthly repayments have risen over the last year from £1,100 to £1,157.

As a result, Lloyds said that saving for a deposit “remains a big hurdle” for many buyers.

For first-time buyers, the typical property price was broadly stable over the last year, increasing by 0.3% to £239,681. While earnings growth outpaced house price inflation, the house price-to-earnings ratio for a first home fell from 6.1 to 5.9, the lowest since 2015.

The gap between Britain’s most and least affordable housing markets has also narrowed slightly over the past year. The South East recorded the largest improvement, with the average home now costing 9.1 times earnings, while Greater London reached 10.3 times earnings.

By comparison, the North East totalled five times earnings, while Scotland remained broadly unchanged at 5.3. Northern Ireland was the only nation or region where house prices became less affordable relative to earnings.

Mortgages director at Lloyds, Andrew Assam, stated: "There are some encouraging signs for people looking to buy a home. Wages have continued to rise while house prices have remained relatively stable, helping to narrow the gap between earnings and house prices.

"However, affordability remains stretched for many households. Mortgage rates are higher than they were a year ago and saving for a deposit continues to be one of the biggest barriers facing first-time buyers. "

“Buyers may have more options than they realise, including mortgages designed for those with smaller deposits. While these won't be right for everyone, they can help some buyers take their first step onto the housing ladder sooner."

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