Housing affordability in the UK has made a "modest improvement" over the past year but remains "stretched" by historic standards, Nationwide has found.

The building society revealed in its latest housing affordability report that a prospective buyer earning the average UK income and buying a typical first-time buyer (FTB) property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay.

It said that this is "well above the long-run average of 30%".

Despite these challenges, Nationwide added that the mortgage market "proved surprisingly resilient" in 2024, with annual house price growth reaching 4.7% at the end of the year.

The number of mortgage approvals returned to 2019 levels, despite typical mortgage rates being around three times higher.

Senior economist at Nationwide, Andrew Harvey, said: "House prices remain high relative to average earnings, with the FTB house price to earnings ratio (HPER) standing at 5.0 at the end of 2024, still far above the long run average of 3.9.

"Consequently, the deposit hurdle remains high. This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost of living crisis more generally, has hampered the ability of many in the private rented sector to save.

"Therefore, it’s not surprising that a significant proportion of FTBs have to draw on help from friends and family to raise a deposit. In 2023/24, around 40% of FTBs had some assistance raising a deposit, either in the form of a gift or loan from family or friends, or through an inheritance."

In terms of regions, all had seen a "modest improvement in affordability" compared to 2023.

London saw the largest improvement in affordability, which Nationwide said was reflective of "relatively weak house price growth in 2024". However, the capital remained the least affordable region by a significant margin.

Harvey added: "Affordability pressures continue to be more pronounced in the south of England and East Anglia, whilst in the northern regions of England and Scotland, mortgage payments as a share of take-home pay are much closer to their long run average.

"In broad terms, the picture that emerges is that this hypothetical typical buyer is located further up the income spectrum as you go from north to south."

---