Paul Huxter - Head of Intermediary Sales and Distribution
House price growth has been fairly stagnant over the past 5 years, with some areas even experiencing negative growth (a few London boroughs come to mind).
At the same time, average salaries have climbed steadily. The latest available data from the ONS reflects this showing that average earnings in the UK have grown 20% while median house sales prices have increased only 1% since 2021. On surface level, it seems to indicate improving mortgage affordability. However, when we look at what is happing behind the scenes, the reality doesn’t quite line up with this expectation.
Stronger earnings and stagnant house prices typically mean greater housing affordability, but it doesn’t paint the full picture. Amid the earnings growth, other factors and events have eroded disposable income and savings potential for prospective first-time buyers (FTBs).
The first indicator that all is not as it seems is that, despite stagnant house prices, rents have continued to grow consistently over the past five years. In fact, the last time there was negative month-on-month growth in private rent prices was April 2020, a -0.1% growth. Between October and November 2024 alone, average rents grew 1.0% in the UK. Since the end of 2021 until the end of 2025, while house prices have grown by 1%, rents have increased by almost 30% (from £1055 to £1368), effectively erasing saving potential for prospective FTBs.
Let’s also consider the cost of utilities. From October 2020 to October 2025, the cost of electricity per kWh has grown by 53% and the cost of gas per kWh has grown by 110%. At the same time, Ofgem’s energy price cap has increased by 68%. Even these figures don’t tell the whole story as households were left to pay up to £2,500 annually (capped by an Energy Price Guarantee) around October 2022. Consumers have had no reprieve in affording their monthly energy bills, further reducing disposable income and savings potential.
Next, from December 2020 to December 2025, the Consumer Price Index (CPI) has experienced a 28.7% relative growth, from 108.9 to 140.1. This means that the average cost of living has outpaced wage growth, further eroding disposable income and the ability to save for a mortgage deposit. And even though remortgage customers have not had to worry about saving up a deposit, they would also have seen their disposable income diminish.
It’s easy to see to look at the core elements of mortgage affordability and argue that affordability must have improved. But, as we know from experience and underwriting many residential mortgage cases, the base numbers never tell the full story and that is why individual underwriting remains such a critical part of the way specialist finance operates.
Contrary to the headline figures of higher average earnings compared to the average house sales price, first time buyers don’t suddenly have it good. The growth in FTBs as a percentage of the market is just a reflection of the fact that those who were waiting to climb onto the property ladder have had to wait long for interest rates to become remotely favourable.
Remortgage cases won’t fare much better, especially at the first time of asking. Those who bought property in 2021 and entered into a 5-year fix, are likely to face higher rates upon remortgaging than when they purchased their home. Depending on the term of the mortgage, they may only have reached single figures by way of percentage of capital repaid. These borrowers may discover that they have to pay higher monthly fees than they did during the first fixed term. And that is before life events, a higher cost of living, and potential property valuation drops have even been considered.
There may be lenders that look at the headline figures and conclude that affordability has improved based on property price and income alone. They may even choose to remove products intended to cater to borrowers with more affordability requirements as a result. And this would, frankly speaking, be a bad move. Luckily, specialist finance will be there to pick up the many cases that these lenders inevitably decline or drop.
Specialist finance lenders are in the trenches of current cost of living crisis, seeing more, not fewer, clients referred based on affordability needs. And while I have my fingers crossed that inflation will ease and rates keep improving, a finance product can’t be built on hope. It needs to deal with reality.
And reality dictates that what buyers and homeowners need more than anything is flexibility: flexibility to borrow more than standard LTIs typically afford, flexibility to purchase with lower deposits, flexibility to afford a remortgage (whether through higher LTI options or longer term lengths), and the flexibility to release equity from their homes to steady themselves against the backdrop of a tough five years for consumers.
For this reason, West One has affordability front and centre in our residential mortgage proposition. We offer LTIs up to 5x income as standard, up to 6.5x income on our Extra range and Unlimited LTI (up to 80% LTV) available in our LTI Boost range. We offer mortgages with as low as 2.5% deposit required, and capital raising remortgages up to 97.5% LTV. Our cutoff age for the end of the mortgage term is 85 on capital repayment mortgages and 75 on interest only mortgages, with terms up to 40 years. We also take an individual approach to credit, and do not credit score applicants.
If you’re looking for a specialist lender to assist on a case where affordability is essential, then contact our residential mortgages team on 0333 123 4556 or email mortgagesales@westoneloans.co.uk