Mortgage repayments are placing a heavy burden on borrowers’ finances – the likes of which has not been experienced since the financial crisis in 2008.
This is according to analysis by the journal INTEREST from Moneyfacts, which found house price rises have outpaced wage increases leaving homeowners having to fork out a much larger chunk of their salary to service their mortgage.
The journal’s research discovered an average earner able to put down the required deposit and commit to a mortgage in the past couple of years will have found their monthly mortgage payment was close to half of their gross salary.
This, it said, has not been the case since the 2008 financial crisis.
Meanwhile, researchers found at the turn of the millennium, the average house price was £78,000, around five times the average wage of £15,800.
Now, in 2025, the average house price is £269,000, around seven times the average wage of £37,600. This, it said, was well above standard lending caps.
During the same time, wages have risen 237% while house prices have increased 345%.
If wages had increased at the same rate as house prices since 2000, the researchers said, the average UK salary would be over £54,000 in 2025.
But house price inflation has actually far outpaced the rise in most household goods during this time. A loaf of bread would cost around £2.28 today based on house price inflation, while a dozen eggs would cost £4.73.
Adam French, head of news at Moneyfacts, said: “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.”
