Why Yorkshire mortgage payments have gone up 52 per cent since 2020: Max Shepherd
The UK housing market has gone through significant and rapid change over the last five years; a pandemic, the cost-of-living crisis, a change in government and major geopolitical uncertainty.
Interest rate volatility has become the norm. The Bank of England’s base rate has dropped from 4.75 per cent to 4 per cent since January, and mortgage rates have followed, though to a lesser extent. This slower decline is due to mortgage pricing being influenced not only by current rates but also by future expectations – the base rate cuts were already factored into mortgage pricing before they occurred.
Inflation, which peaked at 11.1 per cent in October 2022, now sits at 3.8 per cent. The Bank of England expects a rise to roughly 4 per cent in September before a slow return to the 2 per cent target in 2027. Wage growth has outstripped inflation in 2025 so far, improving affordability and providing a tailwind for housing demand.
Interestingly, house prices have remained relatively stable in real terms. Since the end of 2019, house prices have risen 26 per cent, while overall inflation has climbed 28 per cent. Wages have grown by 29 per cent, slightly ahead of house prices. However, fiscal drag – where income tax thresholds remain unchanged – has muted gains in disposable income.
The most significant structural shift in the housing market since 2020 is the ‘new normal’ for interest rates. Even with recent declines, mortgage costs remain far higher than pre-pandemic levels.
People are paying much more for housing, despite real house price stagnation. For example, the average monthly payment on a typical home in Yorkshire and the Humber has jumped from £665 at the start of 2020 to £1,131 today – a 52 per cent increase (28 per cent in real terms). This affordability ceiling has likely kept house prices from rising further.
Stamp duty holidays during the pandemic temporarily boosted activity, but their end in April 2025 led to a surge in completions in March and a lull in April. Encouragingly, mortgage approvals rebounded in May, June and July, nearing pre-pandemic levels.
Since April, supply has outpaced demand, prompting Rightmove to revise its 2025 house price growth forecast from +4 per cent to +2% per cent. This increase in supply is most likely caused by landlords selling off rental properties, rather than new builds entering the market, but given the government’s ambition to build more homes, you’d expect new build supply to increase over the coming years too.
With landlords exiting the market and new build supply hopefully on the way, first-time buyer demand is now critical. The Financial Conduct Authority recently relaxed rules on lenders, allowing greater flexibility when setting stressed mortgage rates in affordability checks, helping more first-time buyers qualify for mortgages.
The Prudential Regulation Authority also eased restrictions on high loan-to-income lending, allowing lenders like Yorkshire Building Society to lower income thresholds on high loan-to-income lending and support more buyers.
As interest rates settle into their new range, the housing market is adapting. Improved affordability and regulatory support could help more people take their first step onto the property ladder. Stable house prices in real terms will help keep homeownership more widely spread, which perhaps is the best outcome to ensure a sustainable housing market.
Max Shepherd is Group Economist at Yorkshire Building Society