A combination of steady wage growth, subdued house prices and declining mortgage rates is creating a more favourable environment for first-time buyers across the UK. After several years of sharp affordability challenges, market conditions are beginning to shift, offering a window of opportunity for many prospective homeowners.
According to Nationwide Building Society, affordability pressures have eased significantly over the past year. Mortgage repayments now take up a smaller share of buyers’ incomes than in recent years, and the number of high loan-to-value mortgages has reached its highest level in over a decade, as lenders renew their support for those stepping onto the property ladder.
Lending Conditions Improve as House Prices Flatten
Mortgage accessibility has improved notably over the last twelve months, supported by a mix of wage increases and flatlining house prices. According to Nationwide, the proportion of a buyer’s take-home pay required to service a mortgage on a typical first-time buyer home, assuming a 20% deposit, now stands at 32%. While this remains slightly above the long-term average of 30%, it is considerably lower than the 48% peak seen in the late 1980s.
This shift has coincided with a drop in fixed-rate mortgage deals across several major lenders, including Nationwide, HSBC, NatWest, Barclays and Halifax. Some headline rates have fallen to between 3.5 and 3.6%, a sharp reduction from the peaks reached during the interest rate hikes of recent years. The possibility of further cuts to the Bank of England base rate later in the year is also contributing to increased competition among lenders, putting downward pressure on borrowing costs.
Nationwide reports that the number of high loan-to-value mortgages (those with deposits of 15% or less) is now at its highest level in more than ten years. This indicates renewed confidence among banks to support first-time buyers. According to Andrew Harvey, senior economist at Nationwide, “With price growth well below the rate of earnings growth and a steady decline in mortgage rates, affordability constraints have eased somewhat over the past year, helping to underpin buyer demand.”
Deposit Challenge Reveals Regional Inequalities
Despite improving repayment affordability, the upfront challenge of saving for a deposit remains a significant barrier for many. Nationwide’s research shows the average deposit required for a typical first-time home now stands at £23,000. For a buyer saving 10% of their take-home pay each month, this would take nearly six years to accumulate.
There is, however, a stark divide across the country. In inner London, the average deposit reaches £44,800, equivalent to nine years of saving for the average worker. Outer London and the south east also remain difficult to access, with required deposits of £32,800 and £26,300 respectively. By contrast, first-time buyers in the north east face a lower deposit hurdle, averaging £13,100, which could be saved in approximately four years.
According to the latest figures from the Office for National Statistics, the average UK house price stands at £270,000, with a modest 1.7% year-on-year rise, well below wage growth. This stagnation in price growth is helping potential buyers, especially in more affordable regions such as Scotland (£13,900), Yorkshire and the Humber (£15,400), and Wales (£17,300), to begin narrowing the gap between their savings and homeownership.
Barclays’ data suggests younger buyers are re-entering the market in response to these changes. One in three people aged 18 to 34 plan to purchase a first or new home this year, compared to a national average of 16%. Their confidence has also risen markedly, from 33% at the beginning of 2025 to 40% by year-end, underlining the tangible impact of improved affordability on the housing aspirations of a new generation.
