Buying a house with a ten% deposit now as reasonably priced because it was 5 years in the past
- Mortgage payments set to return to about 40% of average salary
Buying a home as a first-time buyer is soon to be as affordable as it was in 2021 when interest rates were at rock bottom, new analysis has revealed.
A combination of falling mortgage rates and rising incomes has meant the amount home buyers are spending on their mortgage is on course to return to its most manageable level in almost five years, according to the research by rates scrutineer Moneyfacts.
It found average mortgage payments for someone buying with a 10 per cent deposit, a typical level for those getting on the property ladder, could fall back to between 40 and 41 per cent of a single person’s average gross salary later this year, a level last seen in 2021.
This assumes that average mortgage rates for 10 per cent deposit loans will settle between 4.25 and 4.5 per cent.
This would represent a dramatic fall from when mortgage payments peaked at close to half of gross monthly income in 2024.
More affordable? Easing mortgage rates and rising incomes have restored some breathing space for home buyers, according to Moneyfacts
In reality, most home buyers can secure rates well below the average meaning many could already be paying less than 40 per cent of their income on their home loans.
For someone buying a home with a 10 per cent deposit, the lowest mortgage rate widely available deal is a 3.99 per cent two-year with HSBC, with £749 of fees.
The lowest five-year fix for someone buying with a 10 per cent deposit is a 4.1 per cent rate with NatWest, with £745 of fees.
Moneyfacts crunched the numbers and found that someone buying the average UK property on the average gross monthly salary with a 10 per cent deposit and 4 per cent mortgage rate could expect to be paying 39.64 per cent of their gross annual salary on their monthly mortgage payments.
Pay growth is expected to remain resilient, with businesses budgeting for wage rises of around 3.2 per cent wage this year, according to a Government policy paper published in December.
| Date | 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 | 3.30% | £1,132.00 | 42.57% |
| Jun 2023 | £2,901.88 | £258,275.00 | 5.34% | £1,393.00 | 48.00% |
| 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 | 5.00% | £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% |
| Upper 2026 scenario ** | £3,315.20 | £276,609 | 4.50% | £1,384.00 | 41.75% |
| Middle 2026 scenario ** | £3,315.20 | £276,609 | 4.25% | £1,349.00 | 40.69% |
| Lower 2026 scenario ** | £3,315.20 | £276,609 | 4.00% | £1,314.00 | 39.64% |
| Lower 2026 scenario ** | £3,315.20 | £276,609 | 3.50% | £1,246.00 | 37.59% |
| *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. | |||||
| Source: Moneyfacts analysis, Office for National Statistics, Land Registry | |||||
House prices are forecasted to rise by around 2.5 per cent, according to the OBR easing pressure on buyers.
Meanwhile, inflation is expected to move back towards the Bank of England’s 2 per cent target.
Together, these trends should allow mortgage costs to ease without reigniting runaway house price inflation, according to the Moneyfacts analysis.
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 really tough few years.
First-time buyers in particular stand to benefit from improving affordability but only if house prices don’t start rising faster than wage growth, according to French.
He added: ‘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 balancing between supporting borrowers, rewarding savers fairly, and avoiding the mistakes that made homes increasingly unaffordable in the past.’
