Mortgage affordability to return to ‘manageable’ levels but ultra-low rates should be avoided, Moneyfacts finds

Analysis from INTEREST by Moneyfacts indicated that average mortgage payments could fall and account for 40-41% of gross monthly income, down from a peak of nearly half in 2024. 

If average mortgage rates sit at around 4.25-4.5% as expected, affordability would be back at levels last seen in 2021. 

According to Moneyfacts’ analysis, in June 2024, average mortgage payments rose to 49.1% of a typical gross monthly salary. By June 2025, that fell to 45.1%, and if average rates fall to 4.25% this year, mortgage payments would make up 40.7% of a borrower’s income, or 41.8% if rates are 4.5%. 

Moneyfacts said a more stable economic background was contributing to this, with pay growth expected to remain resilient and businesses budgeting for wage rises of around 2.3%. Further, inflation is expected to fall closer to the Bank of England’s 2% target and house price growth should ease to around 2.5%. 

Date Sponsored First-time buyer knowledge gaps – and where brokers can help Sponsored by Aldermore	Gross monthly salary (ONS)	Average house price (Land Registry)	Moneyfacts Average Mortgage rate	Average monthly mortgage payment*	Share of gross monthly salary
Jun 2020	£2,303.31	£216,208.00	2.17%	£849.00	36.86%
Jun 2021	£2,502.35	£242,777.00	2.72%	£1,008.00	40.28%
Jun 2022	£2,658.87	£258,118.00	3.3%	£1,132.00	42.57%
Jun 2023	£2,901.88	£258,275.00	5.34%	£1,393.00	48%
Jun 2024	£2,993.35	£259,605.00	5.76%	£1,470.00	49.11%
Jun 2025	£3,138.69	£269,079.00	5.12%	£1,416.00	45.11%
Jul 2025	£3,159.33	£269,735	5.11%	£1,419.00	44.91%
Aug 2025	£3,176.00	£272,114.00	5.04%	£1,432.00	45.09%
Sep 2025	£3,180.67	£270,152	5%	£1,421.00	44.68%
Oct 2025	£3,202.33	£269,862.00	5.01%	£1,420.00	44.34%
Nov 2025	£3,212.66	£271,188	4.99%	£1,444.00	44.95%
2026: lower range average rate**	£3,315.20	£276,609	4.25%	£1,349.00	40.69%
2026: upper range average rate**	£3,315.20	£276,609	4.5%	£1,384.00	41.75%
Achievable with good credit and equity**	£3,315.20	£276,609	4%	£1,314.00	39.64%
Best Buy**	£3,315.20	£276,609	3.5%	£1,246.00	37.59%

Source: Moneyfacts 

Ultra-low mortgage rates caution 

However, Moneyfacts said ultra-low rates should not be the aim. It said base rate cuts were urged by the markets to help borrowers, but rapid cuts could cause affordability issues in the future. 

Other low-rate periods resulted in cheap borrowing and encouraged more capital to flow into property, which caused house prices to rise faster than wages. 

Higher house prices ultimately negated any benefits of lower monthly payments and impacted first-time buyers once rates normalised. 

Moneyfacts said a neutral base rate was best, as it would support borrowers without punishing savers, while keeping affordability sustainable. 

Adam French, head of consumer finance at Moneyfacts, said mortgage rates were easing, but the era of “ever-cheaper borrowing is firmly behind us”. 

He added: “Many fixed rate lenders will have already factored forecast rates cuts into their product pricing to some extent and just how far mortgage rates will fall remains to be seen. However, mortgage affordability is moving in the right direction, and that will come as a real relief to borrowers, who have endured a few really tough years. 

“INTEREST by Moneyfacts’ analysis shows that a balanced base rate can deliver genuine breathing space for borrowers while keeping house price growth in check.” 

He added that this should not be mistaken “for a return to the era of ultra-low interest rates”. 

French said: “First-time buyers in particular stand to benefit from improving affordability, but only if house price inflation stays in check. 

“Cutting rates too far risks pumping excess capital back into the housing market, inflating prices and undoing the very affordability gains many buyers and borrowers are hoping for. The challenge for the Bank of England is balance between supporting borrowers, rewarding savers fairly, and avoiding the mistakes that made homes increasingly unaffordable in the past.”