House price increases slowing – how to get on the property ladder quicker

Struggling to get on the property ladder? Well, there’s good and bad news.

The good news is that property price increases have slowed and are now down from the peak of 2022. In fact, UK house sales are set for the slowest year since 2012. So, with average wages rising, it means housing has become more affordable.

However, houses are still less affordable than before the pandemic and building a deposit is still a big stretch for an awful lot of people. And higher mortgage rates mean even when you’ve built a deposit, there’s still a mountain to climb. But it’s not impossible.

Are things changing?

House prices are up 0.1% in the last year on average, with Scotland seeing a 1.7% increase and London a 1% decrease. This is much lower than the 14.3% year on year rise we saw between July 2021 and July 2022.

When prices are rising quickly, it can feel hopeless for buyers. Especially if you’re squirreling away every penny you can afford, but how much you need for a deposit is growing faster than you can keep up. So, in recent months, more sluggish growth and some price falls have made the task a little easier.

First time buyers have seen prices back off very slightly, and by June they had fallen £5,000 from the peak in November last year.

The fact that wages have risen at record rates in the past 12 months has also helped make housing more affordable than a year ago. Back then a typical home cost 7.3 times earnings, but that’s fallen to 6.7 times.

The bigger picture

We shouldn’t get too carried away. A bit of context reveals that life is still incredibly hard for would-be buyers.

Houses are actually less affordable than they were around the start of the pandemic, when they cost 6.2 times earnings.

In fact, house prices in June averaged £288,000, compared to three years earlier when they averaged around £235,000. If you’re saving for a 10% deposit, this means you need to lay your hands on an extra £5,300 thanks to house price rises.

Help supercharge your deposit

The HL Lifetime ISA (LISA) lets you invest for a first home or later life. Some of the benefits are:

• Costs cut. We’ve cut our annual account charge from 0.45% to 0.25%, so that more of what you pay in can help towards your goals. Other charges still apply.
• £4,000 annual allowance. Any investment returns are free from UK income and capital gains tax.
• 25% government bonus. For every £4 you save, you get £1 extra – up to £1,000 per tax year.

You can open a LISA between 18 and 39. After 12 months from the first payment, you can use the money to make an eligible house purchase for a property worth up to £450,000. Or you can wait until you’re 60 and take your money out then.

If you want to take money out before you’re 60 and you aren’t buying your first home, there’s usually a 25% government charge. That means you could get back less than you originally put in.

FIND OUT MORE, INCLUDING CHARGES

ISA and tax rules can change, and any benefits depend on your circumstances. Unlike cash, investments can fall as well as rise in value, so you might not get back what you invest.

This article isn’t personal advice. If you’re not sure what’s right for your circumstances, ask for financial advice.

I have the deposit. Now what?

Even once you have a deposit together, there’s the issue of paying the mortgage. Despite the fact that property is technically more affordable than a year ago, soaring mortgage rates have unwound this benefit. Mortgage costs typically make up 35% of income – up from 30% a year earlier.

It means some younger buyers with bigger mortgages might need to turn to family members for more regular gifts if they can.

This might be something more families consider while mortgage rates are so high. That’s because while getting onto the property ladder isn’t getting any easier, help from family can go an awful long way in bridging the gap.

Find out more about how you can pass on good savings skills, investment knowledge or a helping hand with our guide to pass it on.

Get our ‘pass it on’ guide now