2.5 Measuring affordability

Rising house prices do not necessarily mean that homes are becoming unaffordable. This will depend on whether a household can accumulate enough money for a deposit and whether it has enough income to be able to manage the regular mortgage payments.

Ability to save for a deposit and to manage mortgage payments are both likely to be heavily influenced by household income. Therefore a widely used indicator of housing affordability is the house price-to-income ratio.