Lower interest rates, higher incomes and muted house price growth has improved first-time buyer affordability over the past year, according to the analysis by Lloyds Bank.

Typical monthly mortgage costs have increased by just 0.1% for first-time buyers over the last year to £1,087, as lower interest rates offset the small increase in house prices.

But at the same time UK rental costs have increased sharply over the last year, rising by 5.5% to a monthly average of £1,346. 

The average price of a typical first-time buyer property price is now 5.9 times average earnings, down from 6.2 last year.

The last time the house-price-to-income ratio for first-time buyers dipped below 6 was almost 10 years ago, at the end of 2015 when it was also 5.9.

Across the UK, the average first-time buyer property costs £237,500, which is up by 2.4% over the last year, while average incomes have risen by 6.2% to £40,021.

Calculations are based on the average cost of a five-year fixed rate, which has fallen from 4.7% to 4.5% over the past year, assuming a 10% deposit and a 30-year repayment term.

As a proportion of income, average monthly mortgage costs have fallen from 34.6% to 32.6%. 

That’s the lowest the figure has been since the middle of 2022 prior to the Liz Truss mini-Budget, after which rates soared.

The findings reflect the ongoing North-South divide in the affordability of housing as shown by a recent Zoopla study.

Lloyds head of mortgages Amanda Bryden says: “Buying your first home is still a big challenge, but things are moving in the right direction. 

“Lower mortgage rates, stronger wages and slower house price growth mean it’s becoming a little easier to get on the ladder – the best it’s been for several years.

“Big national numbers often make the headlines, but the reality is that the housing market can look very different from one town to the next.”