More than half of Britain's two and three-bedroom houses are now affordable to households on an average income, but rising mortgage rates are holding back buyers despite improving market conditions.
New research from Zoopla shows that 51% of two and three-bedroom houses for sale fall within the budget of an average-income household. That compares with 45% a year ago. A household earning a combined £53,500 can now afford a property priced up to £301,000. The calculation assumes a mortgage of 4.5 times annual income and a 20% deposit.
However, improving affordability has yet to translate into stronger sales. Average mortgage rates have climbed above 5%, having started the year at around 4%. Meanwhile, sales agreed are running 9% below last year's levels. The figures highlight a growing disconnect between asking prices and the cost of borrowing. More homes may be within buyers' budgets on paper, but higher monthly repayments are limiting demand.
Southern buyers see biggest affordability gains
The greatest improvements have come in southern England, where slower house price growth and rising incomes have brought more properties within reach. The South West recorded the largest increase, with the proportion of affordable two and three-bedroom houses rising by 9.8 percentage points to 47%. The East of England followed, up 9.2 percentage points to 39%. The South East also saw an improvement, with affordability rising from 16% to 23%. However, the region remains among Britain's least affordable housing markets.
London continues to present the greatest challenge. Fewer than 100 two and three-bedroom houses in the capital are listed below the £301,000 threshold. That represents just 0.5% of available properties in this category. The average asking price for a two or three-bedroom house in London stands at £542,500.
By contrast, the North East remains Britain's most affordable region. Some 83% of two and three-bedroom houses are priced within reach of an average-income household. Scotland follows at 80%, with Yorkshire and the Humber at 76%.
Regional affordability at a glance
- North East: 83% (+1.6pp)
- Scotland: 80% (+3.6pp)
- Yorkshire and the Humber: 76% (+5.4pp)
- East Midlands: 74% (+7.9pp)
- Wales: 72% (+6.2pp)
- North West: 71% (+4.5pp)
- West Midlands: 64% (+7.1pp)
- South West: 47% (+9.8pp)
- East of England: 39% (+9.2pp)
- South East: 23% (+7.7pp)
- London: 0.5% (+0.1pp)
- Great Britain: 51% (+5.7pp)
Source: Zoopla, October 2026. Changes shown in percentage points.
Where buyers can get more for their money
Zoopla also identified towns where buyers have a particularly wide choice of affordable family-sized homes. Across the identified hotspots, the average asking price for a two or three-bedroom house is around £189,000. That is more than £100,000 below the national average of £293,200.
In four Scottish towns – Keith, Alloa, Kilwinning and Arbroath – every two and three-bedroom house currently advertised falls below the £301,000 threshold. Bootle in Merseyside also stands out, with 98% of properties in this category considered affordable. Treorchy and Newtown in Wales both recorded 97%, while Immingham in Lincolnshire reached 95%.
Even parts of southern England offer relatively affordable housing. In Suffolk, 87% of two and three-bedroom houses in Leiston fall below the threshold. The figure is 83% in Par, Cornwall, and 77% in East Cowes on the Isle of Wight. The research found an average of around 90 properties for sale in each hotspot, giving buyers a reasonable choice rather than just a handful of cheaper listings.
Buyers gain negotiating power
Richard Donnell, executive director at Zoopla, said rising incomes and slower house price growth were improving affordability. However, higher borrowing costs continued to restrict activity. He commented: “The number of two and three-bedroom houses within reach of households on an average income has increased as incomes continue to rise faster than house prices. However, the impact is being offset by higher mortgage rates which are adding to the monthly costs of taking out a new mortgage.”
Donnell said the affordability gap between northern and southern regions remained substantial. He added: “We expect house prices to continue to rise more slowly than incomes which will continue to help improve the affordability of housing. A greater choice of homes for sale is supporting a buyers market and means that sellers are having to be more realistic on price.”
For estate agents, the findings reinforce the importance of realistic asking prices as buyers contend with higher mortgage costs. Donnell also cautioned against waiting indefinitely for cheaper borrowing. “Anyone considering a move should take a fresh look at what they can afford and what's available locally. Waiting for mortgage rates to fall further may not necessarily put them in a better position to buy,” he said.
