As we move into early summer 2025, Basingstoke’s property market paints a bleak picture—especially for first-time buyers. Headlines scream that getting a foot on the ladder is harder than ever, and for many, that feels painfully true. With the average first-time buyer deposit in 2024 hitting a staggering £61,000, dreams of homeownership are slipping further out of reach.
Soaring rents and the ever-rising cost of living have created a perfect storm. Young buyers are told to save more, spend less, and be patient—advice that rings hollow when house prices continue climbing faster than salaries. For many in Basingstoke and beyond, the idea of owning a home now feels more like a fantasy than a future plan.
Most people instinctively turn to the house price-to-earnings ratio (HPER) as the go-to benchmark for affordability.
In 1983, the South East house price-to–earnings
ratio was 2.95; today it’s 5.76.
i.e. today, the average house price is 5.76 times more than the average annual income of a first-time buyer.
On the face of it, it is a lot more expensive to buy a home today than, say, the early 1980s. After all, if house prices are nearly six times the average salary, it certainly feels more expensive than when they were just under three times.
But… let’s just hold on a second. Before accepting the headlines at face value, let’s look under the bonnet and examine the stats.
First-time buyers with a decent credit history (and have since 2010) can obtain a 95% mortgage, meaning they would only need to save for a 5% deposit.
The average cost of a first-time Basingstoke buyer’s
house is presently £312,200.
Based on a 95% mortgage at 4.29% with a 5% deposit of £15,610, on a 29-year repayment mortgage,
The average Basingstoke first-time buyer home
costs £1,490.96 per month.
But that’s not the whole picture.
Even though the HPER is a lot higher, I believe there is a more meaningful indicator of first-time buyer affordability—and one that tells us how much of an actual stretch homeownership is for first-time buyers—and that is “mortgage payments as a percentage of take-home pay”.
This measure tells you how much of a first-time buyer’s monthly salary is going out, month in month out, in mortgage costs.
And this is where things get interesting. The ‘mortgage as a percentage of take-home pay’ affordability ratio considers not just the price of the house against salaries but also interest rates, mortgage term lengths, and income tax changes. It’s a more holistic view of the financial burden on first-time buyers and gives a much clearer ‘real world’ idea of how ‘affordable’ owning a home really is. The graph below and the remaining part of this article explain why this is the case.
In the graph— the red bars represent the first-time buyer HPER in Basingstoke, while the black line shows first-time buyer mortgage payments as a percentage of take-home pay.
In the early to mid-1980s, Britain emerged from a recession, leaving the property market and key housing ratios relatively subdued.
Then came the 1988 housing boom, sparked by the looming withdrawal of dual mortgage interest tax relief (MIRAS). Buyers who had planned to move in future years rushed to beat the deadline, creating a spike in demand and pushing house prices—and both ratios (black and red)—sharply upwards.
But once the MIRAS cut-off passed, demand for homes collapsed almost overnight. The boom, driven by easy mortgage lending, proved unsustainable. As inflation picked up in the late 1980s, the government raised interest rates to protect the sterling’s position in the Exchange Rate Mechanism, pushing Bank of England base rates to 12% by late 1989 and peaking at 15% by Black Wednesday in 1992. The combination of soaring interest rates, a deepening UK recession, and the loss of dual-MIRAS shattered buyer confidence and sent the housing market into a steep decline.
First-time buyers were hit hardest, facing the double blow of stagnant wages and rapidly rising mortgage costs. Mortgage payments as a share of income surged to record highs, locking many out of homeownership or saddling them with unaffordable repayments. This led to many repossessions, which further saturated the market with homes for sale and reduced house prices.
By the mid-1990s, things had settled, as the fall in house prices seen in the early 1990s turned into house price stability and interest rates at a more manageable 5% to 7%.
The early 2000s told a very different story. Between 2000 and 2007, house prices surged by 10 to 18% annually, while interest rates remained relatively stable between 4.5% and 6%. This steady growth pushed house prices and affordability ratios as buyers spent more—upfront and monthly—to secure a home. By 2008, a growing share of household income was being swallowed by mortgage repayments.
After such a good economic run between 2000 and 2008, the global financial crash of 2008 put an end to the increasing ratios as interest rates plummeted.
The Bank of England cut rates in 2009 to record lows to stimulate the economy. As a result, despite house prices gradually increasing again from 2010 onwards and the HPER rising with them, the percentage of income spent on monthly mortgage payments actually declined. That created an unusual situation where, for nearly a decade, the red line in the graph (HPER) and black line (mortgage costs as % of income) diverged dramatically. It showed that although homes looked less affordable on paper, the monthly cost of owning a home decreased.
Then came Covid. The property market saw a surge in activity and prices during Q3 2020 and 2021, fuelled by the so-called “Covid boom”. People re-evaluated where they wanted to live, some moved out of cities, and there was a surge in demand. Meanwhile, interest rates remained low, giving buyers greater spending power. This caused house prices to rise quickly in many areas in 2020 and 2021 (pushing up both ratios because of house price growth).
However, by mid-2022, inflationary pressures prompted the Bank of England to begin hiking interest rates. The result? A steep increase in mortgage costs throughout 2022 and 2023, meaning both ratios continued to grow, not because of house price growth as per the previous two years but because of higher mortgage costs.
By mid-2023, this affordability metric peaked, but notably, not to the levels seen in the late 1980s or even 2007 before the financial crash. The black line representing mortgage payments as a percentage of take-home pay rose to just 44.4%.
Now, as we move into 2025, the good news is that mortgage payments as a percentage of take-home pay are decreasing, suggesting that affordability is improving for first-time buyers in Basingstoke.
That’s despite house prices remaining relatively high, which elevates the HPER. What’s changing is the balance between mortgage rates and earnings. Real wage growth (wages after inflation) is growing, so first-time buyers have more money. As interest rates are no longer climbing (but dropping), it means first-time buyers are starting to regain some ground, and affordability is getting better.
And that’s the core message: while the HPER gets all the headlines, the mortgage burden on monthly incomes truly tells the story of affordability.
South East first-time buyers spend 39.8% of their take-home pay on mortgages, compared to 47.3% in 2007 and 61.2% in 1989.
The bottom line is that it costs less to pay for a mortgage today than in 2007 and 1989, which is, in my opinion, a far more meaningful and relatable measure.
It’s also the number that matters most to lenders. When someone applies for a mortgage, the affordability check the bank or building society do isn’t just about how much the property costs. It’s about how much of their monthly income is needed to service the debt. That’s why this black line is so important. It reflects the reality of homeownership for first-time buyers more than any headline house price ever could.
So, to Basingstoke’s first-time buyers—and their parents helping with deposits—don’t be disheartened by scary headlines about house price multiples. Keep an eye on the mortgage cost as a percentage of income. Right now, that figure is heading in the right direction, and that’s something worth paying attention to.
Understanding these trends can help buyers time their move better, negotiate confidently, and ultimately make informed choices about what they can truly afford. With interest rates stabilising and mortgage burdens falling, 2025 could be a much more welcoming year for aspiring homeowners in Basingstoke.
What are your thoughts on this?
