MORTGAGE affordability is the tightest since the Global Financial Crisis of 2008, a new analysis has found, with one broker saying it mirrors the rising “cost of everything”.
Another broker criticised estate agents for too often inflating values, which means people “working harder to afford homes that simply shouldn’t be priced this way”.
An analysis by trade body, UK Finance, shows significant regional variation in how much of their gross household income borrowers commit to initial mortgage repayments, which is a key measure of affordability.
At a UK level, the research found that homebuyers are currently spending on average just over a fifth (21.3%) of their gross income — the highest level since 2008.
Regional variations
At a Local Authority level, borrowers in two places — North Norfolk in East Anglia (25.7%) and the London Borough of Hillingdon (25.1%) — spent over a quarter of their gross income on mortgage repayments.
The remaining eight of the top 10 least affordable places were in the London commuter belt, in places like Luton (24.9%), Slough (24.8%) and Spelthorne (24.8%).
At the other end of the scale, seven of the 10 most affordable Local Authorities were in Scotland, in places like East Ayrshire and Inverclyde, with borrowers there needing almost nine percentage points less of their gross income to cover initial mortgage payments compared with those borrowing in North Norfolk.
Although the City of London is predominantly a business district with limited residential stock, its high‑earning buyer profile means it ranks among the most affordable areas on this measure.
James Tatch, Head of Analytics at UK Finance, said: “It’s been challenging times for those trying to buy a property in recent years, with affordability pressures weighing heavy.
“But the pain is not felt equally across the country. Property prices, wages and demographics vary greatly across and within regions. All of these have an impact on affordability and if you’re a landlord, how profitable your investment property is.”
Rollercoaster ride
According to Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, “mortgage affordability is riding the same rollercoaster as general household affordability”.
He continued: “Sadly it’s a rollercoaster that just keeps getting steeper, as the cost of everything is climbing far quicker than incomes. There is only so much that can be cut back on, which most households would have done by now.
“These figures show a large contrast between the areas worst affected but also highlights the benefit of getting professional advice on what, for most, is their largest monthly outgoing.”
Inflated prices
Another broker Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, described the data as “stark” and said one issue, particularly apparent in South Wales, is estate agents inflating asking prices.
He said: “Swansea and the surrounding areas have historically offered some of the best value in the UK, yet we’re seeing that advantage steadily eroded, not by fundamentals but by how properties are being brought to market.
“A growing concern is the influx of self-employed estate agents with limited experience and little grasp of genuine local values. Properties are increasingly listed at aspirational prices rather than evidence-based ones, distorting comparables and pushing affordability metrics in the wrong direction.
“When sellers across a postcode all benchmark against inflated listings, the whole market drifts upwards without any real economic justification.
“For local buyers, particularly first-time buyers, this means working harder to afford homes that simply shouldn’t be priced this way. Accurate, research-led valuations aren’t just good practice, they’re essential to keep.”
Tax burden
Martin Rayner, Director at Compton Financial Services, said the problem is that rising mortgage costs are only part of the pressure on homeowners.
He continued: “Alongside higher rates, borrowers face rising living costs and a growing tax burden, all tightening household finances year on year. For those remortgaging in particular, repayments have increased significantly, and the full impact may not yet be felt.
“With potential tax rises, higher council tax and persistent inflation, there is real uncertainty over how much more households will be squeezed, particularly with global pressures that could push costs even higher.
“Affordability may still work on paper, but in reality there is less room for error, and the direction of travel is clear: increasing pressure on incomes. It is difficult to see this continuing without some wider impact on household finances or the housing market.”
Meanwhile, Bob Singh, Founder at Uxbridge-based Chess Mortgages, said the figures in the analysis get worse when you factor in tax: “The figures mentioned in the report mention payments as a percentage of gross income but taxation also needs consideration.
“For a £50k pa earner, the gross monthly is £4,167 and net £3,293. If the mortgage is £1,042 representing 25% of gross income, then it works out to be 31% of net pay.
“For a £75k pa earner, the figures are then £6,250 gross and £4,504 net. Then the mortgage would be £1,562 representing 25% of gross income and 35% of net income.”
Craig Fish, Director at London-based Lodestone Mortgages, added: “A fifth of your gross salary going on a single monthly payment before you’ve paid a bill, bought a week’s food or put fuel in the car. That’s where the average UK homebuyer sits right now, and in parts of the commuter belt it’s closer to a quarter.
“These aren’t people living beyond their means. These are people trying to get on the housing ladder at the worst time in a generation.”
