How 2023 Became the Worst United Kingdom Housing Year: Bank of England Data

The 2023 Affordability Finding (0:00)

Hey, chibis! I'm Aiwee, and today we're talking about Is This the Worst Time Ever to Buy a House in the UK. If you enjoy stories like this, hit the like button and subscribe if you haven't already — let's go! In twenty twenty three, a single median earner in the United Kingdom needed to set aside more than forty six percent of gross salary every month to service an eighty five percent loan to value mortgage. That figure sits third in a forty three year dataset.

Only the late nineteen eighties and early nineteen nineties, when rates climbed past fourteen percent, pushed the monthly burden higher. Yet twenty twenty three also ranks as the second most expensive year for the price of the home itself. Both pressures hit at once. That dual squeeze is the central fact of this story, and it forces a question the usual headlines avoid. If we judge affordability by only one number, are we even looking at the right one?

The first price is the ticket.

Two Prices, One Affordability (1:00)

The pound figure on the listing, the number a lender will underwrite. The second is the cost of borrowing. The interest rate, applied month after month, that determines how much of each pay cheque leaves the account before anything else. Most public discussion of Britain's housing market looks at the ticket alone. It measures the price to earnings ratio, how many years of the typical pay packet the average home costs.

Useful, but it hides half the story. A home you can afford in principle but cannot afford to finance is not an affordable home. So before we go anywhere, we have to hold both numbers on the page at the same time. In nineteen eighty four, the average United Kingdom house sold for twenty four thousand three hundred and twenty pounds. Median salary before tax was seven thousand four hundred pounds.

That gave a price to earnings multiple of three point two nine.

Regional Price to Earnings (2:00)

Today, the average house sits at two hundred and sixty eight thousand one hundred and thirty two pounds. Median pay is thirty nine thousand and thirty nine pounds. The multiple has climbed to six point eight seven nationally. In England it is seven point four. In Wales five point nine.

Northern Ireland five point three. Scotland four point seven. The line peaked in twenty twenty two at seven point six three, the highest reading in the dataset, and has since eased slightly as incomes grew a little faster than prices. By the ticket measure alone, affordability has begun to improve in places. But ticket price is only half the story.

The Halifax Building Society has tracked mortgage interest rates in Britain back to eighteen fifty three. The Bank of England has its own series that extends to today. Stitched together, the long run record is striking. Before the nineteen twenties and nineteen thirties, mortgage rates were remarkably stable. Lenders charged close to five percent for decades.

Then the twentieth century arrived, and the rate moved on a wild ride.

Mortgage Rate Wild Ride (3:00)

In nineteen ninety, mortgage rates touched fifteen percent. In the late twenty teens and early twenty twenties, by contrast, lenders offered fixed deals below two percent. So the cost of borrowing a hundred thousand pounds in two thousand nineteen was radically different from the cost in nineteen eighty nine. That volatility is the second half of the affordability equation. Holding the two timelines side by side, the historical pattern becomes clear.

In every previous stress point, when one cost was crushing buyers, the other was easing. Between nineteen eighty eight and nineteen ninety, interest rates jumped from eleven percent to fifteen percent. Mortgage payments rocketed from forty three percent of median gross pay to nearly sixty percent. That was the highest monthly burden in the entire forty three year series, and the period coincided with the largest wave of repossessions on record. Yet the price to earnings multiple was modest, around the twenty fifth highest on the list.

The 1996 Calm (4:00)

Buyers faced brutal financing costs on relatively cheap homes. Then came nineteen ninety six, the low point of the whole timeline. The multiple had fallen back to three point three. Mortgage rates had eased to six point six seven percent. The monthly outlay dropped to twenty three point three percent of median pay, the lowest in the dataset.

By either measure, this was the easiest moment in the available record. But it was the calm before the storm. House prices climbed relentlessly for a decade, peaking in two thousand and seven. By that peak, the multiple had reached a new high, mortgage rates sat at five point seven nine percent, and the monthly burden had climbed to roughly forty five percent of median gross pay. Two thousand and seven was the mirror image of the early nineteen nineties.

The ticket was punishing, but financing remained manageable. By the combined measure, it ranks as the second worst year in the dataset. After the financial crisis, house prices fell and rates dropped to historic lows.

The 2021 Baseline (5:00)

By twenty seventeen, mortgages were available below two percent again. In twenty twenty one, the average monthly payment on an eighty five percent loan to value mortgage was eight hundred and forty seven pounds, consuming thirty two point five six percent of median pay. By the ticket measure, twenty twenty one was the most expensive on record at seven point three three times earnings. But the monthly burden was near the bottom of the historical range. Once again, one pressure was on, the other was off.

That alternation broke after twenty twenty one. The Bank of England began lifting rates, and mortgages moved with them. By twenty twenty three, the average mortgage rate had reached five point five four percent.

Two Years of Pain (5:45)

The same eighty five percent loan that cost eight hundred and forty seven pounds a month in twenty twenty one now cost one thousand three hundred and forty four pounds. Almost five hundred pounds a month extra in just two years. The monthly burden climbed to forty six point one percent of median gross pay. The most recent monthly payment sits at one thousand two hundred and ninety four pounds. The relief that buyers had been promised by the slow easing of the ticket price was more than offset by the new cost of borrowing.

When both measures are combined into a single score, the picture sharpens. A public methodology, linked to a spreadsheet with sources and assumptions, ranks every year from nineteen eighty four to twenty twenty six. The single most unaffordable year is twenty twenty three. The price to earnings multiple sits second highest in the series. The monthly burden sits third highest.

Two thousand and seven is second.

Five Years in the Worst Ten (6:45)

The four most recent years, twenty twenty two, twenty twenty three, twenty twenty four and twenty twenty six, are stacked alongside it. All five of the most recent years fall inside the worst ten. Twenty twenty five ranks tenth, suggesting a brief improvement before later rate moves pushed things the other way. The national average hides regional extremes. In the Royal Borough of Kensington and Chelsea, a four point six eight square mile patch of West London, the average property currently costs around twenty five times the average local annual income, down from forty four times in two thousand and eighteen.

The data describes the borough as at its most affordable since just after the financial crisis. In Blackpool, the median house price is around one hundred and thirty seven thousand pounds, with terrace houses for about seventy five thousand pounds, roughly two times the United Kingdom median salary, making it the second most affordable place in England.

Burnley and Inverclyde (7:45)

Yet the share of households renting in Blackpool is well above the national average, a reminder that cheaper ticket prices do not always translate into higher ownership. Burnley, in Lancashire, sits at roughly three point nine times median pay, the most affordable place in England. Across the border in Scotland, Inverclyde is described in the data as the cheapest place in the United Kingdom, with reference to a high value property at one point two million pounds used as a comparison point. Regional dispersion is wide, and the national average is doing a lot of work to hold the picture together. Several caveats matter.

Every figure is calculated on a single median earner. Dual income households face a meaningfully different burden, and a single buyer on the median wage faces a harsher one. The eighty five percent loan to value assumption is used for consistency, but a seventy five percent loan produces different monthly numbers and can shift the ranking.

Data Caveats and Gaps (8:45)

The ticket price is an average across all transactions, so it includes a small number of very high value sales that may not reflect the experience of a typical first time buyer. The mortgage rate series blends Halifax historical data with Bank of England current data, which can diverge at certain points. The dataset does not address supply constraints, planning policy, deposit accumulation, or the role of buy to let buyers in pricing. These are real factors, but they sit outside the two price framework. The cyclicality of the drivers is the most important counterpoint.

Across forty three years, the forces that move affordability have swung widely. Interest rates have ranged from below two percent to fifteen percent. House prices have roughly decupled in money terms. Wage growth, by contrast, has been the least dramatic variable. In every previous peak of monthly burden, including the brutal late nineteen eighties, conditions eventually eased.

Rates came down, or ticket prices fell, or both.

Cyclical Forces Return (9:45)

Mean reversion is the historical pattern, not the exception. That does not predict when the current squeeze will break, but it does remind us that the present is not the permanent state. So is this the worst time ever to buy a house in the United Kingdom. By the ticket price alone, no. By the monthly financing cost alone, no.

But by the combined measure, which holds both pressures on the page at the same time, twenty twenty three currently sits at the top of the worst list. Four of the five most unaffordable years are clustered in the most recent half decade. The forces driving that ranking are cyclical, and they have eased before. Whether they ease again soon, and through which channel, is a question the data alone cannot answer. It only tells us where the present moment sits in a long historical record.

The rest is policy, demographics, and choices made far outside any spreadsheet.

Two Prices, One Verdict (10:45)

If this re-examination of the data has been useful, the underlying spreadsheet with sources and assumptions is linked below. There is no prescription here, only a clearer way of reading the same numbers. Affordable housing is not a slogan. It is a relationship between two prices that rarely move together, and a record of when they did.