Mortgage affordability could return to its most manageable level in almost five years, new analysis from Interest by Moneyfacts reveals.

The research shows that average mortgage payments, which peaked at close to half of gross monthly income in 2024, could fall back towards 40% to 41% of the average gross salary later this year, a level last seen in 2021.

If average mortgage rates settle around 4.25% to 4.50%, based on current assumptions.

Analysis shows that in June 2024, average mortgage payments hit a peak of 49.1% of a typical gross monthly salary and fell to 45.1% 12 months later in June 2025.

Moneyfacts forecasts the June 2026 affordability outlook to be:

• 40.7% at a 4.25% average mortgage rate
• 41.8% at a 4.50% average mortgage rate

This marks a significant improvement from the affordability squeeze seen in 2023 and 2024, according to Moneyfacts, when sharp rate rises pushed monthly mortgage affordability to its limits or beyond for many households.

The improvement is being supported by a more stable economic background as pay growth is expected to remain resilient, with businesses budgeting for around 3.2% wage rises.

House price growth is forecast to moderate to around 2.5%, easing pressure on buyers, while inflation is expected to move back towards the Bank of England’s 2% target.

Moneyfacts predicts that these trends should allow mortgage costs to ease without reigniting runaway house price inflation.

While calls for rapid Base Rate cuts often focus on helping borrowers, Moneyfacts’ historic rates data shows that cutting rates too far risks storing up future affordability problems.

During previous periods of ultra-low rates, cheap borrowing encouraged more capital to flow into property, pushing prices up faster than wages.

Any short-term relief from lower monthly payments was quickly absorbed by higher house prices and left first-time buyers worse off once rates normalised.

Instead, Moneyfacts says a more balanced, ‘neutral’ Base Rate supports borrowers without punishing savers, helping to deliver sustainable affordability rather than another boom-and-bust cycle.

Moneyfacts head of consumer finance Adam French says: “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.”

Also commenting, Propertymark president of National Association of Estate Agents Mary-Lou Press adds: “While it is welcome that mortgage affordability is beginning to return to levels seen at the start of the decade, there is still some way to go before inflationary pressures and base rates ease enough for households to feel a genuine improvement in day-to-day housing costs.”

“It is encouraging to see lenders responding to greater economic stability by offering more competitive mortgage products, which should help rebuild confidence among buyers. However, affordability is about more than interest rates alone. High house prices, the challenge of raising a deposit, and wider cost-of-living pressures continue to act as barriers, particularly for first-time buyers.”

“A stable and balanced lending environment is essential. A return to ultra-low interest rates might risk fuelling house price inflation and undermining long-term affordability. If current momentum is maintained alongside progress on increasing housing supply, 2026 could mark a year of more sustainable growth for the UK housing market.”