"Putting aside the not inconsiderable tasks of affording rapidly rising rent costs and saving a sizeable deposit, monthly mortgage repayments are eating up almost half of gross earnings – the toughest burden since the 2008 financial crisis"
- Adam French - Moneyfacts
Monthly mortgage payments are now the heaviest burden on UK households since the 2008 financial crisis, according to exclusive analysis from INTEREST by Moneyfacts. The findings highlight the strain on household finances amid softening house price growth and ongoing debate over property tax reform.
Recent homebuyers who could afford the required deposit and secure a mortgage over the past couple of years are spending close to half of their gross monthly salary on repayments.
At the turn of the millennium, the average house price was £78,000, around five times the average wage of £15,800. By 2025, the average house price has risen to £269,000, roughly seven times the average wage of £37,600, significantly exceeding standard lending caps.
Since 2000, wages have grown by 237% while house prices have risen 345%. If wages had matched house price inflation, the average salary in 2025 would exceed £54,000. By comparison, the cost of household goods has risen far more slowly. A loaf of bread would cost around £2.28 today and a dozen eggs £4.73, based on house price inflation.
An average homebuyer could reduce monthly costs by around £100 by taking one of the lowest two-year fixed mortgage rates currently available, at 90% loan-to-value, around 4.20%, compared with June’s average rate of 5.12%. Even so, this would still represent roughly 38% of gross monthly income, a level similar to repayments in June 2018 at average rates.
Adam French, head of news at Moneyfacts, said, “Affordability may have eased a touch over the past 12 months, but buying a home in 2025 is still too much of a financial stretch for many,” he said. “Putting aside the not inconsiderable tasks of affording rapidly rising rent costs and saving a sizeable deposit, monthly mortgage repayments are eating up almost half of gross earnings – the toughest burden since the 2008 financial crisis."
“Years of ultra-low borrowing costs, Government incentives and a lack of housing supply have driven house prices far ahead of wages, leaving many buyers caught between high prices, expensive borrowing and strict lending rules. It all means that a typical borrower today will need to take a mortgage over a 50-year term to keep their repayments to a more affordable 35% of gross monthly income.
“There remains an acute risk that the market could overcorrect or overheat depending on the future path of interest rates, inflation and wage growth despite a recent softening of house price growth. We now need a period of stability where modest house price growth allows incomes to catch up so the market can return to more sustainable levels that benefit homeowners, homebuyers and the wider economy. In the meantime, it may mean holding rates where they are until inflation is in check is what is needed to nip another boom-and-bust cycle in the bud.”
