UK homebuyers face worst mortgage affordability since 2008, data shows

UK homebuyers are facing the worst mortgage affordability pressures for almost two decades, although the “pain” is not being felt equally across the country, according to industry data.

The banking body UK Finance said that at a nationwide level, initial mortgage repayments were typically swallowing up more than a fifth (21.3%) of a homebuyer’s gross income – the highest level since 2008.

The data relates to 2025, so it does not take into account the economic turmoil unleashed by the Iran war, which has helped push up the cost of mortgage deals and means that many people taking out a mortgage face paying hundreds or even thousands of pounds more than before the conflict.

The headline figure also masked significant regional differences, said the banking body.

The “least affordable” areas, based on mortgage repayments as a percentage of income, were north Norfolk and the west London borough of Hillingdon. Homebuyers there typically spent more than a quarter of their gross income on repayments (25.7% and 25.1% respectively).

The remaining eight of the 10 least affordable places were in what could broadly be described as the London commuter belt – for example, Luton in Bedfordshire (24.9%), Slough in Berkshire (24.8%), Broxbourne in Hertfordshire (24.4%) and Harlow in Essex (24.2%).

At the other end of the scale, seven of the 10 most affordable local authority areas were in Scotland. Topping that list are two locations: East Ayrshire and Inverclyde. In both, the average homebuyer in 2025 was committing 17% of their gross income to meet their initial mortgage repayments.

Some will be surprised to see the City of London named as the third “most affordable” local authority for home ownership, which UK Finance said was because those who wanted to buy in the City and could afford to do so were typically in the highest-earning income brackets.

The City is dominated by financial services firms, but it includes the 2,000 flats of the Barbican estate and is one of the most expensive places in the UK to buy a home.

UK Finance said it was a “quirk” of its analysis that the City of London was as affordable, on this metric, as some parts of Scotland where property prices were much lower.

James Tatch, head of analytics at UK Finance, said the past few years had been challenging for those trying to buy a property, with affordability pressures weighing heavy.

“But the pain is not felt equally across the country,” he added. “Property prices, wages and demographics vary greatly across and within regions. All of these have an impact on affordability.”

Despite sustained affordability pressures fuelled by high property prices and borrowing costs, and the challenge of saving up a deposit, 2025 was a year of “robust activity” in borrowing for house purchase, said the industry body. The number of mortgages advanced by banks and other lenders for that purpose reached 723,000 – up 17% on 2024.

UK borrowers had been benefiting from cheaper home loans, but that was upended by the outbreak of the war on 28 February, which led to vast numbers of fixed-rate mortgage deals being pulled and repriced upwards. However, the past few weeks have seen a gradual downward trend in fixed rate mortgage pricing.