The Intermediary – March 2026 - Flipbook - Page 12
RESIDENTIAL
Opinion
Earnings up, prices
static, affordability
improving?
H
ouse price growth
has been fairly
stagnant over the
past five 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 Office for
National Statistics (ONS) reflects this,
showing that average earnings in the
UK have grown 20% while median
house sales prices have increased only
1% since 2021.
This 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).
Despite stagnant house prices, rents
have continued to grow consistently
over the past five years. In fact, the
last time there was negative monthon-month growth in private rent
prices was April 2020, at -0.1% growth.
Between October and November 2024
alone, average rents grew 1.0%.
Since the end of 2021 until the
end of 2025, while house prices have
grown by 1%, rents have increased by
almost 30%, 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 grew by 53% and the cost of gas
per kWh by 110%. At the same time,
Ofgem’s energy price cap increased by
10
The Intermediary | March 2026
68%. Even these figures don’t tell the
whole story. as households were le
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.
Next, from December 2020 to
December 2025, the Consumer Price
Index (CPI) 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. Even though remortgage
customers have not had to worry
about saving up a deposit, they
would also have seen their disposable
income diminish.
Seeing the full story
It’s easy 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. That is why
individual underwriting remains such
a critical part of the way specialist
finance operates.
Contrary to the headline figures,
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
beer. 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
PAUL HUXTER
is head of intermediary
sales and distribution
at West One Loans
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. 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.
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.
While I have my fingers crossed that
inflation will ease, a finance product
can’t be built on hope. It needs to deal
with reality.
Reality dictates that what buyers
and homeowners need more than
anything is flexibility: flexibility to
borrow more than standard loanto-incomes (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. ●
