Mortgage affordability is continuing to ease – and it could soon be the best it has been in nearly five years.

Fresh analysis from INTEREST by Moneyfacts suggests falling mortgage rates and rising incomes are giving borrowers long-awaited breathing room, reversing the intense affordability squeeze of recent years.

After peaking in 2024, average mortgage payments are now heading back toward more manageable territory. By later this year, repayments could fall to around 40–41% of gross monthly income — a level last seen in 2021 — if mortgage rates settle in the 4.25–4.50% range.

Key data:

June 2024: Mortgage payments peaked at 49.1% of average gross monthly income

June 2025: That figure eased to 45.1%

2026 outlook:

40.7% at a 4.25% average mortgage rate

41.8% at a 4.50% average mortgage rate

That shift marks a meaningful improvement for borrowers – and a signal that housing affordability is stabilising rather than deteriorating further.

The recovery is nit just just about rates. A more balanced economic backdrop is doing some heavy lifting:

Pay growth is expected to stay resilient, with employers budgeting for wage rises of around 3.2%

House price growth is forecast to cool to roughly 2.5%, easing pressure on buyers

Inflation is expected to drift back toward the Bank of England’s 2% target

Together, these forces allow mortgage costs to ease without reigniting another house price surge — a crucial difference from past cycles.

But calls form some people for rapid Base Rate cuts may be loud, but history suggests they come with risks.

Moneyfacts’ historic data shows that ultra-low rates often backfire. Cheap borrowing fuels demand, drives house prices higher, and quickly erodes any affordability gains. When rates eventually rise again, buyers — especially first-timers — are left worse off.

The sweet spot lies in a neutral, balanced Base Rate — one that supports borrowers without penalising savers or inflating another property bubble.

Adam French, head of consumer finance at Moneyfacts, said: “Mortgage rates are easing, but the era of ever-cheaper borrowing is firmly behind us. 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. But this should not be mistaken for a return to the era of ultra-low interest rates

“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.”

 Sources: Moneyfacts Analyser, ONS & Land Registry

*Capital repayment mortgage over 25 years with a 10% deposit using the Bank of England borrowing calculator

**Potential affordability is subject to the average mortgage rate reaching the quoted figure. Forecast assumes 2.5% house price growth and 3.2% salary increase.