IT’S GETTING CHEAPER TO LIVE IN LONDON – WHY HOUSING COSTS ARE FALLING FAST

It’s become cheaper to live in London in recent times as property prices have fallen and mortgage costs have dipped, analysis for The i Paper shows.

Easing mortgage costs along with sluggish house price growth since 2022 have meant that housing costs for homeowners have fallen in real-terms across the whole of the UK in the last three years, according to Savills analysis.

But the more dramatic falls have been seen in the capital, because house prices have fallen by larger amounts.

Savills calculations looked at the average monthly mortgage payments that someone would make if they bought an average priced home – £342,000 – and got a two-year home loan with a 25 per cent deposit, known as 75 per cent loan-to-value.

It then adjusted the costs to account for inflation.

In London, it found that typical mortgage costs were around £2,426 a month – down £790 three years ago.

Costs were still higher than five years ago, by £58, and 10 years ago, by £68.

In the UK as a whole, costs have dropped £329 over the past three years to an average of £1,350 per month.

London is still far more expensive to live in than the rest of the UK, but the figures show that the gap is narrowing.

This is down to more dramatic real-terms falls in housing prices in London.

Are house prices falling alongside mortgage rates?

Mortgage rates have fallen dramatically in the last three years, by all metrics, as the Bank of England base rate has come down from highs of 5.25 per cent in 2023.

But the Savills analysis shows that house prices in London have fallen in cash terms over the past three years too, and once you account for inflation, they have fallen even more dramatically than the rest of the UK.

In contrast, housing prices have risen in the UK as a whole, though the rise is dwarfed by the rate of inflation.

That means in real-terms, once the change has been adjusted to account for inflation, house prices have fallen in the UK too.

In cash terms, house prices have grown 2.68 per cent in the last three years in the UK as a whole, and in London they have fallen 3.69 per cent, Savills’ number-crunching shows.

But once inflation is factored in, they have fallen 6.78 per cent in the UK as a whole, and 12.56 per cent in London.

Why are prices falling more dramatically in London than elsewhere?

Lucian Cook, director of residential research in Savills says that the fact that housing costs are becoming cheaper at a quicker rate in the capital than elsewhere “essentially reflects a bigger real-terms price adjustment in house prices in London”.

But why are prices falling more dramatically in London?

Experts say there are multiple factors at play.

Emma Fildes, a property buyer at Brickweaver, said the reason that prices in London had fallen was partly because it contained properties in two parts of the market that had been “hammered most” in recent years.

She said: “The first is leasehold flats in blocks of flats. Rising service charges, ground rent and building-safety issues has deterred buyers appetite. The second is those houses at the top end where buyers are facing a mounting tax bill, be it via non-dom tax changes, mansion tax or personal tax.”

“This has driven up living expenses, which though they maybe able to afford, leaves them with less in their pocket. To compensate for this they want a discount and sellers, on the whole are having to accommodate if they want out.”

Property expert Jonathan Rolande added: “Across the UK as a whole, inflation of consumer items and assets is growing fast, so in comparison, property is in real-terms resilient but a poor performer.

“In addition to this, fewer higher net worth individuals are buying in London due to tax and broader global situations.”

2026-03-05T06:49:02Z