Halifax reveals improvement in affordability for first-time buyers

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by Kay Murchie

The latest Halifax FTB Affordability Review has revealed that housing affordability for potential first-time buyers (FTBs) is at its lowest level in over six years.

Since the market peaked in 2007, affordability has more than trebled with houses deemed “affordable” in the first three months of 2009, for someone with an average income in one fifth of local authorities.

The Halifax points out that the house price to average earnings ratio has fallen from a record high of 5.84 in July 2007 to an estimated 4.34 in March this year - a decline of 26%.

According to Martin Ellis, Halifax housing economist, a marked improvement in housing affordability can be seen for FTBs.

Mr Ellis explains: “The significant reductions in house prices, relative to average earnings, has resulted largely from the decline in house prices since the autumn of 2007. As a result, housing is at its most affordable, on this key measure, for more than six years.”

However, despite the improvement in affordability, the number of FTBs has fallen to a very low level.

According to the Council of Mortgage Lenders, the number of FTBs in February 2009 was 46% lower than in February last year.

The latest data from the Land Registry puts the average UK house price at £152,895 - 16% lower than it was this time last year.