Mortgage affordability in Britain could soon look more like it did during the low-rate period of 2021, offering relief to borrowers after several years of sharply rising costs.
New figures suggest the share of income spent on mortgage repayments may fall back towards levels last seen when interest rates were far lower.
Analysis from INTEREST by Moneyfacts shows that typical monthly mortgage payments could drop to between 40 and 41 per cent of average gross earnings later this year, provided mortgage rates settle in the 4.25 to 4.50 per cent range.
That would mark a clear improvement on the strain faced by households in 2023 and 2024, when rapid interest rate rises pushed affordability to its limits.
The improvement reflects a combination of easing mortgage rates and steady wage growth, which together are beginning to ease pressure on household finances. Mortgage costs peaked in mid-2024, when average repayments swallowed 49.1 per cent of a typical gross monthly salary.
By June 2025, that share had fallen to 45.1 per cent as borrowing costs started to come down from their highs. Looking ahead to June 2026, Moneyfacts expects affordability to improve further, with repayments taking up around 40.7 per cent of income if average rates fall to 4.25 per cent, or 41.8 per cent if they stabilise at 4.50 per cent.
Borrowers able to secure more competitive deals could see even bigger gains. At a four per cent mortgage rate, repayments could drop to around 39.6 per cent of gross income, while best-buy products priced at 3.5 per cent could reduce this further to about 37.6 per cent.
Mortgage rates have already fallen to their lowest level since 2022, opening up new opportunities for both first-time buyers and existing homeowners looking to remortgage, and bringing affordability closer to the levels seen during the low-rate era of 2021.
Borrowers able to secure more competitive deals could see even bigger gains
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GETTYAaron Shinwell, Chief Lending Officer at Nottingham Building Society, said: “Mortgage rates are now at their lowest levels since 2022, creating real opportunities for anyone looking to buy or remortgage.
“Although a rate cut this month looks unlikely, rates have already passed their peak and could gradually edge down over time, which good news for the 1.8 million borrowers expected to remortgage this year and first-time buyers finding a more realistic route onto the property ladder.”
The Bank of England base rate is currently 3.75 per cent. Markets anticipate the Bank to hold this rate at their next meeting this week.
Mr Shinwell anticipates modest downward movements in rates throughout 2026, which should help bolster demand in the housing market.
Experts anticipate modest downward movements in rates throughout 2026, which should help bolster demand in the housing market
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GETTYShifting expectations around future base rate reductions are already feeding through into mortgage pricing, he noted.
Despite the improving outlook, experts caution against any return to the ultra-cheap borrowing that characterised earlier periods.
Adam French, Head of Consumer Finance at Moneyfacts, said: “Mortgage rates are easing, but the era of ever-cheaper borrowing is firmly behind us.
By June 2025, that share had fallen to 45.1 per cent as borrowing costs started to come down from their high
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GETTY“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.”
Historical data demonstrates that slashing rates too aggressively tends to funnel excess capital into property, driving prices upward faster than wages can keep pace.
Mr French warned that first-time buyers would benefit from improved affordability only if house price inflation remains contained, noting that excessive rate cuts risk “pumping excess capital back into the housing market, inflating prices and undoing the very affordability gains many buyers and borrowers are hoping for.”
