Borrowers now spend more than a fifth of gross income on repayments
Mortgage affordability has reached its tightest level since the financial crisis, with borrowers now spending a fifth of their income on repayments, according to data from UK Finance.
The trade body’s Lending Where We Live report found that homebuyers spent an average of 21.3% of gross household income on initial mortgage repayments in 2025, the highest level since 2008. It also showed that 723,000 house purchase mortgages were advanced during the year, up 17% from 2024.
The figures point to a divided market, with affordability pressures differing sharply by location. North Norfolk in East Anglia was the least affordable local authority area, with borrowers spending 25.7% of gross income on mortgage repayments. Hillingdon in London followed at 25.1%.
The rest of the 10 least affordable areas were largely in the London commuter belt, including Luton at 24.9%, and Slough and Spelthorne, both at 24.8%.
| Least and Most Affordable Areas | |||
|---|---|---|---|
| Least affordable | Payments as % of income | Most affordable | Payments as % of income |
| North Norfolk | 25.7% | East Ayrshire | 17% |
| Hillingdon | 25.1% | Inverclyde | 17% |
| Luton | 24.9% | City of London | 17.1% |
| Slough | 24.8% | North Ayrshire | 17.2% |
| Spelthorne | 24.8% | West Dunbartonshire | 17.7% |
| Havering | 24.6% | Eilean Siar | 18% |
| Harrow | 24.5% | Mid Ulster | 18.2% |
| Broxbourne | 24.4% | Causeway Coast & Glens | 18.2% |
| Barking & Dagenham | 24.3% | South Ayrshire | 18.2% |
| Harlow | 24.2% | Dumfries and Galloway | 18.3% |
| Source: UK Finance | |||
Scotland had seven of the 10 most affordable local authority areas. Borrowers in places such as East Ayrshire and Inverclyde needed almost nine percentage points less of their gross income to meet initial mortgage payments than those in North Norfolk. The City of London also ranked among the more affordable areas on this measure, reflecting its high-earning buyer profile and limited residential stock.
UK Finance also reported wide variation in buy-to-let returns. All UK regions saw growth in buy-to-let purchase activity in 2025, but rental yields differed significantly. The strongest gross yields were in Scotland, where some areas recorded returns of more than 9%.
The lowest yields were found across parts of England, including South Hams in Devon at 5%, Cambridge and the Derbyshire Dales at 5.3%, and Rutland at 5.4%.
| Gross rental yields by highest and lowest returns | |||
|---|---|---|---|
| Highest return | Gross rental yield (%) | Lowest return | Gross rental yield (%) |
| Renfrewshire | 9.9% | South Hams | 5% |
| West Dunbartonshire | 9.9% | Kensington & Chelsea | 5.1% |
| North Lanarkshire | 9.6% | Three Rivers | 5.2% |
| Aberdeen City | 9.6% | Cambridge | 5.3% |
| East Ayrshire | 9.6% | Harborough | 5.3% |
| Inverclyde | 9.5% | Maldon | 5.3% |
| Falkirk | 9.4% | Derbyshire Dales | 5.3% |
| Dundee City | 9.4% | Torridge | 5.4% |
| Clackmannashire | 9.3% | Rutland | 5.4% |
| South Lanarkshire | 9.3% | Rochford | 5.4% |
| Source: UK Finance | |||
The report said the buy-to-let sector continued to face pressure from stamp duty surcharges, the phased removal of income tax relief on mortgage interest and stricter underwriting standards. These factors have reduced landlord profitability and led some investors to leave the market.
Regional house price differences were also reflected in mortgage debt levels. London borrowers had the highest average mortgage debt, at £280,000. That was almost £70,000 above the South East, the next highest region. Northern Ireland had the lowest average mortgage debt, at £99,500.
Across most regions, 12% to 14% of borrowers were on variable rates. The proportion was higher in London, at 16%, and in Northern Ireland, at 18%.
Interest-only lending showed greater regional variation. In London, 12% of mortgages were interest-only. The share was 5% across the North, Yorkshire and Humber and Scotland, and 4% in Northern Ireland.
“It’s been challenging times for those trying to buy a property in recent years, with affordability pressures weighing heavy,” said James Tatch (pictured right), head of analytics at UK Finance.
“But the pain is not felt equally across the country. Property prices, wages and demographics vary greatly across and within regions. All of these have an impact on affordability and if you’re a landlord, how profitable your investment property is.
“The UK housing market faces both challenges and opportunities at a national and local level, and understanding these local markets enables better decision making from government, local authorities and others. We look forward to continuing our work with these stakeholders to improve the mortgage market.”
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