Mortgage affordability has reached its tightest level since 2008, with borrowers spending an average of 21.3% of gross income on initial repayments, according to UK Finance.

The trade body’s latest Lending Where We Live report found that 723,000 house purchase mortgages were advanced in 2025, up 17% year-on-year.

However, the report highlighted sharp regional differences in affordability, mortgage debt and buy-to-let returns across the UK.

UK Finance said borrowers in North Norfolk were spending 25.7% of gross income on mortgage repayments, followed by Hillingdon at 25.1%.

The remaining eight of the 10 least affordable areas were largely in the London commuter belt, including Luton at 24.9%, Slough and Spelthorne at 24.8%, Havering at 24.6% and Harrow at 24.5%.

At the other end of the scale, seven of the 10 most affordable local authorities were in Scotland, including East Ayrshire and Inverclyde, where borrowers spent 17.0% of gross income on initial repayments.

UK Finance said borrowers in these areas needed almost nine percentage points less of their gross income to cover initial mortgage payments than those in North Norfolk.

BUY-TO-LET YIELDS STRONGEST IN SCOTLAND

The report also found that buy-to-let returns were strongest in Scotland, despite pressures on landlords from stamp duty surcharges, the removal of income tax relief for mortgage interest and tighter underwriting standards.

All UK regions saw growth in buy-to-let purchase activity in 2025, but gross rental yields varied widely.

The highest returns were all in Scotland, led by Renfrewshire and West Dunbartonshire at 9.9%, followed by North Lanarkshire, Aberdeen City and East Ayrshire at 9.6%.

The lowest gross rental yields were found across England, including South Hams at 5.0%, Kensington & Chelsea at 5.1%, Three Rivers at 5.2%, and Cambridge, Harborough, Maldon and Derbyshire Dales at 5.3%.

LONDON BORROWERS CARRY HIGHEST DEBT

UK Finance said regional house price differences were also reflected in average mortgage debt.

London borrowers had average mortgage debt of £280,000, almost £70,000 more than in the South East, which had the next highest level.

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 Northern Ireland at 18%.

Interest-only mortgage use also varied, with 12% of mortgages in London on an interest-only basis, compared with 5% across the North, Yorkshire and Humber and Scotland, and 4% in Northern Ireland.

James Tatch, head of analytics at UK Finance, said: “It’s been challenging times for those trying to buy a property in recent years, with affordability pressures weighing heavy. 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.”

Joe Pepper, UK chief executive of PEXA, said: “This report highlights how much the homebuying experience varies across the UK, underlining the importance of understanding local markets to support better decision-making.

“As the industry continues to digitise, there is a real opportunity to create a more efficient, transparent and responsive housing market for borrowers across the country.”

Mary-Lou Press, president of NAEA Propertymark, said: “Buying a home is becoming increasingly difficult for many households, with mortgage affordability now stretched to levels not seen since 2008.

“Higher interest rates and the challenge of saving for a deposit mean many people who could afford monthly repayments are still locked out of buying. It’s no longer just about income; access to upfront cash is becoming the biggest barrier.

“Property professionals are also seeing clear regional differences. In more affordable parts of the UK, buyers are still active, but in higher-value areas such as London and the South East, stretched affordability is having a much greater impact, slowing activity and forcing buyers to adjust expectations.

“There’s still strong demand to own a home, but without changes to lending rules and more homes being built, many first-time buyers may continue to struggle to get on the ladder.”