Mortgage payments have consumed over 40% of borrowers’ income for the third consecutive month, according to research by Stonebridge.
The latest data revealed that in September, mortgage repayments accounted for 40.1% of the average borrower’s salary.
The Mortgage Affordability Index found that although affordability improved slightly in September from 40.6% in August, current figures remain significantly higher than historical averages.
In November 2021, before the Bank of England began raising rates, mortgage payments accounted for just 32.1% of incomes, indicating an increase of 8.5 percentage points since then.
The long-term average stands at 35.9%.
Research found that rising house prices have offset benefits from the gradual reduction in mortgage rates.
The average rate on new mortgages dropped from 4.86% to 4.78% between August and September.
However, Stonebridge found that the average loan size rose to £198,383 in September, representing a 27-month high driven by increased house prices.
Rob Clifford, chief executive at Stonebridge, said: “While the Bank of England has started to cut interest rates again, it’s clear from the data that most borrowers are yet to see the benefits from reduced borrowing costs.
“With house prices still rising and mortgage rates elevated, homeowners are now spending more than two-fifths of their salary on mortgage payments – well above the historical average.
“This highlights that the cost-of-living squeeze is far from over for millions of households.”
Clifford added: “The good news is that we’re likely past the worst, with the Bank of England likely to continue cutting interest rates throughout 2025.
“As we go into 2025, we expect that to filter through to borrowers in the form of lower mortgage rates, which will provide relief for millions of households.
“With more than 1.8 million fixed rates due to end in 2025, now is the time for brokers to re-engage with their clients, many of whom will be concerned about how much they are going to have to pay going forward.
“If anything, this is a perfect opportunity for brokers to remind borrowers of the importance of good quality, independent advice.”
