The UK’s house price to earnings ratio, used to measure housing affordability, reached a record national high of 8.8 times in June this year.

According to new analysis carried out by the Intermediary Mortgage Lenders Association (IMLA), this is up from the previous high of 8.7 times in August 2007.

IMLA’s latest report, The Mortgage Affordability Paradox, also suggested there are also significant regional differences, with the ratio reaching 11.0 in London in Q3 this year – more than twice the figure in the North East of England.

Despite mortgage interest and capital repayment – as a percentage of homebuyer income – reaching a record low of 16.7% in 2020, IMLA’s analysis also showed that first-time buyer numbers have dropped. Since 2007, a cumulative shortfall of 2.7 million first-time buyers has arisen, with 2020 seeing a shortfall of nearly 200,000 against expected purchasers based on previous behaviour.

For the many who wish to buy but cannot, IMLA warned there are potentially “significant financial implications”. The trade body’s report found that nationally, those who own a home instead of renting see a comparative 25% reduction in their living costs.

IMLA executive director, Kate Davies, commented: “We speak often about the challenges that plague the housing market, but our latest report brings to light just how severe these are. Even with the costs of borrowing at relative lows, many aspiring homeowners will still struggle to step onto the ladder without the support of loved ones.

“This paradox is something that we must all tackle to ensure the same opportunities that we have benefited from are made available to coming generations.”

She added: “It’s certainly time for a rethink. We need a clear vision of how the many components of the housing and mortgage market pull together to boost housing supply, better keep house price growth at controlled levels, and ensure safe borrowing practices.”

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