Although wages have risen above the inflation rate in recent months and house prices have dropped from their peak in summer 2022, Nationwide stated that ‘housing affordability is still stretched.

According to the lender’s house price index, a larger share of take-home pay is now allocated to mortgage payments. For someone earning the average UK income and aiming to purchase their first home with a 20% deposit, the monthly mortgage payment amounts to 37% of their net income.

This figure surpasses the longstanding average of 30%.

Despite typical increases in earnings and a 3% decrease in house prices from the record high two years ago, escalating mortgage expenses have exacerbated affordability challenges.

With the Bank of England raising interest rates to 5.25% in an effort to curb inflation, mortgage costs have become more expensive. According to Nationwide, the interest rate on a five-year fixed-rate mortgage for a borrower with a 25% deposit was 1.3% in late 2021. It has since surged and is now approximately 4.7%.

Recent official data indicated that basic pay increased by 6% in the three months leading to April, while inflation stood at 2.3% in the same period. However, figures from the Resolution Foundation, a living-standards think tank, show that when adjusted for inflation, weekly wages have only risen by £16 over the past 14 years.

Further complicating affordability issues, UK house prices have resumed their ascent, rising by 1.5% last month compared to June 2023.

Nationwide added that there have been fewer house-buying transactions over the past year.

The total number of house-buying transactions has decreased by approximately 15% compared to the pre-pandemic year of 2019. Transactions involving mortgages have seen an even steeper decline, nearly 25%. However, cash transactions have increased by 5% compared to pre-pandemic levels.

According to Nationwide figures, Northern Ireland experienced the fastest house price growth at 4.1% over the three months from April to June. Conversely, it became 1.8% cheaper to purchase a house in East Anglia over the course of the year.