Easing mortgage costs this year may do little to improve affordability for buyers if they are offset by modest house price growth, according to new analysis of lending and pricing data from Moneyfactscompare.co.uk.
Markets currently expect the Bank of England to begin trimming interest rates, with the base rate forecast to fall from 3.75% to somewhere between 3.25% and 3.5% over the course of the year.
That is already feeding through into cheaper fixed-rate mortgage products. However, any relief for borrowers risks being balanced out if lower borrowing costs stimulate renewed upward pressure on prices.
The data show the average first-time buyer in 2025 borrowed about £236,000 to purchase a property worth roughly £310,000, implying a loan-to-value ratio of 78% and a deposit of 22%.
FIRST-TIME BUYER IMPACT
On those figures, even a relatively small increase in prices materially raises the cash deposit required, despite lower monthly repayments from cheaper rates.
Homemovers are typically less exposed but still sensitive to price movements. The average homemover borrowed around £251,000 against a property valued at £466,000, with an average LTV of 58% and equity of 42%.
Remortgagers were borrowing an average £215,000 on properties worth about £460,000, equating to 50% LTV and substantial equity cushions.
First-time buyers remain most vulnerable to any renewed price inflation because they must save larger deposits, while existing owners are better insulated by accumulated equity but still face affordability tests on higher loan amounts.
AFFORDABILITY GRIPES
Mary-Lou Press, NAEA Propertymark President, says: “Easing mortgage rates will be welcome news after several years of affordability pressures and could support modest house price growth without significantly worsening buyer affordability.
“While lower rates may help first-time buyers offset rising prices, high deposits and stretched incomes remain major barriers for many. Home movers and remortgage borrowers, who typically hold more equity, are better placed to benefit.
“Lower rates remove a headwind rather than transform the market, and lasting improvements to affordability will depend on stronger wage growth and increased housing supply.”
