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UK homes cost nine times average pay as house prices hit record high

·Finance and policy reporter
·2-min read
Properties in Kentish Town, north London, as new Office for National Statistics (ONS) data showed average UK house prices hitting a new record high. Photo: PA.
Properties in Kentish Town, north London, as new Office for National Statistics (ONS) data showed average UK house prices hitting a new record high. Photo: PA.

UK house prices have risen by 5.4% over the past year to a record high £245,000 ($331,448) average sale price in October.

New Office for National Statistics (ONS) data on Wednesday is from official transaction records, providing the most reliable insight into average prices, albeit with a significant timelag.

It marks the fastest year-on-year growth in more than four years, providing fresh evidence of the housing market boom since the first nationwide lockdown eased earlier this year.

Stamp duty and other land tax cuts across the UK are widely seen to have fuelled an already-surging market as COVID-19 and restrictions have sparked a widespread desire to move home.

The record high prices also underline the affordability challenges facing many aspiring homeowners, coming just days after separate ONS data on average weekly earnings.

READ MORE: Bank of England plans mortgage review that could help first-time buyers

Official data shows the average UK employee earns £512 a week, which would be an annual salary of £26,624. It means house prices are now more than nine times higher than average incomes for salaried workers.

It also comes in the same week the Bank of England announced a review of mortgage lending rules that could pave the way to easier access to home loans for first-time buyers.

WATCH: Why are house prices rising during a pandemic?

Threadneedle Street said in its financial stability report, published on Friday, it was reviewing mortgage market rules that limit the amount people can borrow as a multiple of their income and limit the number of high loan-to-value mortgages banks can offer.

The rules, introduced in 2014, are meant to stop people borrowing more than they can afford and to cap the amount of riskier mortgages in the market.

Meanwhile David Westgate, group chief executive of Andrews Property Group, also noted the rising house prices were in “stark contrast” to falling high street prices detailed in inflation data out on Wednesday.

“For now, house prices are being driven upwards by the stamp duty holiday but rising unemployment and the small matter of a potentially messy No-Deal Brexit will almost certainly see average values cool off during 2021,” he said.

“Rising redundancies and reduced mortgage availability at higher loan to values will invariably hit demand but the feel-good factor generated by a working vaccine, coupled with the continued lack of supply, could prevent the steep drop in prices some are expecting.

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