Nationwide Building Society says affordability has improved over the past year
First-time buyers are seeing a meaningful easing in affordability pressures, as falling mortgage rates and stagnant house prices combine to give young buyers a long-awaited leg up.
Nationwide Building Society says affordability has improved over the past year, helped by wage growth running ahead of house price rises and a steady decline in mortgage rates. That shift has underpinned a surge in first-time buyer activity, which was around 20% higher last year than in 2024.
Andrew Harvey, Nationwide’s senior economist, said: “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.”
The mutual says the share of high loan-to-value mortgages – where buyers put down deposits of 15% or less – is now at its highest level for more than a decade, underlining how lenders are once again backing those buying their first home.
That improving backdrop has been reinforced by a wave of mortgage rate cuts. Nationwide, HSBC, NatWest, Barclays and Halifax have all trimmed fixed-rate deals, with some headline rates now available from around 3.5 to 3.6%, sharply below the peaks seen during the interest-rate shock.
The prospect of further Bank of England base rate cuts later this year is also encouraging lenders to compete harder, easing monthly repayments and nudging more buyers into the market.
Deposit hurdle remains daunting
Despite the improved affordability picture, the upfront challenge of saving a deposit remains severe – particularly for buyers in London and the South. Nationwide’s research shows first-time buyers now need to build an average £23,000 deposit to buy a typical starter home. Saving that amount would take nearly six years, assuming a buyer can put aside 10% of their take-home pay each month.
However, there is a stark regional divide. In inner London, the typical deposit stands at £44,800, which would take an average worker nine years to save. In contrast, buyers in the north east need just £13,100, which could be built up in around four years, reflecting far lower house prices.
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Other high-deposit regions include outer London (£32,800), the outer south east (£26,300) and the south west (£24,700). Meanwhile, Scotland (£13,900), Yorkshire and the Humber (£15,400) and Wales (£17,300) remain among the most accessible parts of the UK for first-time buyers.
House prices have remained largely flat across much of the country, giving deposit savings a chance to catch up. The latest Office for National Statistics data shows the average UK home costs £270,000, with prices rising just 1.7% year-on-year – well below recent wage growth.
Nationwide says this has pushed its key affordability measures back towards long-run norms. A buyer on an average income, purchasing a typical first-time buyer home with a 20% deposit, would now spend around 32% of their take-home pay on their mortgage – slightly above the long-term average of 30%, but far below the 48% peak seen in the late 1980s.
Young buyers return to the market
Separate figures from Barclays suggest improving affordability and greater certainty over housing policy are drawing young buyers back. One in three 18- to 34-year-olds say they plan to buy a first or new home this year – more than double the national average of 16%.
Generation Z savers have already built average deposits of £19,442, with plans to add almost £9,000 more this year. Confidence among young buyers has also risen sharply, climbing from 33% at the start of 2025 to 40% by the end of the year. In December, 22% of young buyers used a deposit of less than £20,000, up from 13% a year earlier – another sign that falling rates and flat prices are starting to make a difference.
