Affordability squeeze drives shift to extended mortgage terms and alternative credit
Mortgage repayments in the UK remain 45% above January 2022 levels, according to the latest Equifax UK Affordability Barometer, which tracks consumer credit trends, including mortgages.
The figures, covering data to the end of May 2026, reflect the sustained impact of higher interest rates on homeowners. Extended mortgage terms continue to feature prominently in new lending, with 11% of originations running beyond 35 years — a pattern Equifax attributes to borrowers seeking to reduce monthly commitments.
Average mortgage annual percentage rates are currently at two-year highs.
"We continue to see adjustments in how households are managing their finances, with higher mortgage repayment levels and extended loan repayment terms," said Paul Heywood (pictured right), chief data and analytics officer at Equifax UK.
"Consumers continue to demonstrate their ability to adapt spending behaviours and maintain financial commitments, but at the same time, today's economic conditions require continued careful monitoring of household financial resilience."
Meanwhile, separate analysis from Moneyfactscompare.co.uk highlights the risk to borrowers who delay refinancing decisions.
Based on a typical mortgage of £250,000 over 25 years, a 0.25 percentage point rise to the Bank of England base rate (BBR) would increase annual repayments by approximately £450, while a 0.50 percentage point increase would add around £906 per year.
Two- and five-year fixed rates reached their 2026 peaks on 3 April at 5.90% and 5.78% respectively. Both have since moved lower, though they remain above their early March levels. The Moneyfacts average mortgage rate has eased from 5.66% in May 2026 but continues to stand above the 4.90% seen at the start of March.
| Mortgage market analysis | ||||||
| Average mortgage rates | Jun-21 | Jun-24 | Jun-25 | Mar-26 | May-26 | 12-Jun-26 |
|---|---|---|---|---|---|---|
| Standard variable rate (SVR) | 4.41% | 8.18% | 7.48% | 7.13% | 7.13% | 7.13% |
| Two-year tracker | 2.39% | 5.94% | 4.91% | 4.43% | 4.61% | 4.49% |
| Two-year fixed | 2.59% | 5.93% | 5.12% | 4.84% | 5.78% | 5.62% |
| Five-year fixed | 2.82% | 5.50% | 5.09% | 4.96% | 5.68% | 5.59% |
| 10-year fixed | 2.98% | 6.03% | 5.48% | 5.61% | 6.15% | 6.20% |
| Source: Moneyfactscompare.co.uk. Average rates shown are as at the first available day of the month, unless stated otherwise. | ||||||
Significant rate reductions in the near term appear unlikely. The five largest high street lenders — Barclays, HSBC, Lloyds Bank, NatWest and Santander — are currently pricing their lowest two-year fixed deals at an average of around 4.41%, approximately 0.29 percentage points above the two-year swap rate. That margin is unchanged from late February, when the lowest rates from the same lenders averaged 3.62%. Ongoing tensions in the Middle East, now more than 100 days into the latest conflict, and lingering speculation over a possible BBR increase, are weighing on the prospects for material cuts.
The BBR has remained at 3.75% since it was cut in December 2025. Over the six months since, the average standard variable rate (SVR) has fallen by only 0.14 percentage points, from 7.27% to 7.13%. Year-on-year, BBR has declined by 0.75 percentage points, while the average SVR has dropped by just 0.35 percentage points.
"Indecisiveness could be the biggest enemy for borrowers this year," said Rachel Springall (pictured right), finance expert at Moneyfactscompare.co.uk. "Rate increases can add hundreds of pounds a year to mortgage repayments, as already proven by recent mayhem in the mortgage market.
"It is highly unlikely that lenders will make substantial cuts in the months ahead until there is a clearer path for future rate setting. The cost of living is expected to worsen in the coming months which puts pressure on the Monetary Policy Committee at the Bank of England to consider a rate increase.
Springall noted that while a base rate tracker mortgage can look attractive at a time when fixed rates are rising and BBR is held, economists expect a BBR increase before the year is over, which would directly impact tracker rates. "However, there are some tracker mortgages that will allow borrowers to exit the deal early, without a nasty early repayment penalty," she added.
Springall also mentioned offset mortgage as another alternative, which could be ideal for those who feel their savings could help them clear their loan a few years sooner and save thousands of pounds in interest charges.
"It is always wise to seek advice from a broker to understand the pros and cons of different mortgages, and the affordability criteria from each lender, such as those who might consider higher loan-to-income multiples," she said.
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