New analysis from independent mortgage broker Private Finance shows that the average UK home has increased in value almost three times faster than its owner’s wages over the past decade.
The average UK home experienced a 43% rise in value between 2008 and 2018, from £160,954 to £229,861. In comparison, the average annual UK salary has increased by just 15% from £24,606 to £28,860 over the same period. Had wages experienced the same percentage increase as house prices, the average employee would now be earning £35,187 per year.
Homeowners in London boroughs and the Home Counties have witnessed their homes outperform them to the greatest extent. The average property price in Kensington and Chelsea has soared by 85% over the ten-year period, while wages have increased by just 3%.
Also, falling mortgage rates mean that the monthly cost of owning a home has become considerably more affordable. From 2008 to 2018, the average two-year fixed rate mortgage at 75% loan-to-value (LTV) has fallen from 4.77% to 1.73%. While house prices have increased, the average UK homeowner who purchased at the end of 2018 would only be paying £18 (3%) more per month on their monthly mortgage payments thanks to falling mortgage rates, this is despite the average loan size increasing by 43%.