Muttuo Market Analysis · September 2026 · Updated 1 September 2026
The UK mortgage market has regained much of the product choice lost during the recent period of volatility, but improved availability has not translated into a full recovery in affordability.
Lenders remain active across a wide range of loan-to-value bands, giving borrowers thousands of mortgage products to choose from. The bigger constraint is now the cost of borrowing. Higher mortgage rates mean the same monthly budget supports less debt, while house prices have not fallen enough nationally to fully offset that loss of purchasing power.
Analysis report overview
That imbalance is visible across the wider market. Mortgage approvals and transactions remain subdued, price growth is weakening in parts of the country, and buyers have more properties to choose from. At the same time, mortgage arrears remain relatively low, suggesting that the current adjustment is affecting purchasing decisions more than it is causing widespread financial distress.
This report combines lending, housing, earnings and mortgage pricing data to examine where the real constraint now sits. Our analysis suggests that access to credit has improved, but affordability remains the bigger barrier to a stronger market recovery.
Three key findings
01
Mortgage choice has recovered
Product availability is strong across the market, but greater choice has not restored the purchasing power lost to higher borrowing costs.
02
Buyer activity remains constrained
Mortgage approvals and transactions remain subdued, suggesting affordability is limiting demand more than access to mortgage products.
03
Mortgage stress remains contained
Arrears are falling despite weaker affordability, indicating that the market is adjusting mainly through cautious borrowing and reduced demand rather than widespread payment difficulties.
Mortgage choice is no longer scarce
The UK mortgage market now offers substantial product choice, making availability less of a barrier than earlier in 2026. Moneyfacts recorded 7,357 residential mortgage products at the start of August, up from 7,177 in July. Around 90% of the products withdrawn during the March and April volatility had returned to the market.
That recovery extends to borrowers with smaller deposits. Moneyfacts recorded 939 products at 90% LTV and 495 at 95% LTV in August. The number of 95% LTV products was also higher than a year earlier, rising from 442 to 495.
Mortgage product choice has recovered
Number of residential mortgage products available at selected comparison points.
Source: Moneyfacts UK Mortgage Trends Treasury Report, August 2026
Lender appetite also remains evident in official data. The FCA recorded £78.0 billion of new mortgage commitments in Q1 2026, 14.2% more than a year earlier. Mortgages above 90% LTV accounted for 8.0% of gross advances, up 1.4 percentage points year-on-year.
Buyer activity has not kept pace. Bank of England data shows 56,100 house purchase approvals in July 2026, below the previous six-month average of around 60,800.
What the data tells us
Mortgage choice has recovered faster than buyer activity.
Greater product availability is no longer the main barrier. The bigger constraint is whether borrowers can afford to use the mortgage options available to them.
Higher rates have reduced buying power
The bigger affordability problem is not whether borrowers can find a mortgage, but how much borrowing the same monthly budget can support. Moneyfacts recorded an average two-year fixed rate of 5.63% in August 2026, compared with 5.01% a year earlier and 4.85% in February.
Muttuo analysis shows that a £1,500 monthly repayment over 30 years would support a mortgage of around £279,100 at 5.01%, compared with £260,400 at 5.63%. That is approximately £18,700, or 6.7%, less borrowing power than a year earlier. Compared with February 2026, the reduction is around £23,900.
The same monthly payment now buys less mortgage
Estimated mortgage supported by a £1,500 monthly repayment over 30 years at selected average two-year fixed rates.
4.85%
5.01%
5.63%
Source: Muttuo analysis using Moneyfacts average two-year fixed mortgage rates. Assumes a capital-and-interest repayment mortgage over 30 years with a £1,500 monthly payment. Excludes fees and does not represent a lender affordability assessment.
House prices have not fallen enough nationally to offset that loss in borrowing power. The average UK property price was around £272,000 in June 2026, 2.0% higher than a year earlier. Buyers therefore face a market where the same monthly mortgage budget supports less borrowing while average property prices remain higher.
What the data tells us
The same monthly budget now supports less borrowing.
Higher mortgage rates have reduced purchasing power even as product choice has improved, leaving buyers able to finance less without increasing their monthly repayment.
Smaller deposits increase the rate penalty
Borrowers with smaller deposits are paying a clear premium for the additional borrowing they need. In August 2026, the average five-year fixed rate was 5.46% at 60% LTV, compared with 5.75% at 90% LTV and 6.08% at 95% LTV.
On a £250,000 mortgage over 30 years, Muttuo analysis shows that this pricing gap adds around £46 a month at 90% LTV and £99 a month at 95% LTV compared with the 60% LTV rate.
Higher LTVs increase the monthly cost
Additional monthly repayment on a £250,000 mortgage over 30 years compared with 60% LTV.
60% LTV
£0
90% LTV
+£46
95% LTV
+£99
Note: Based on average five-year fixed rates of 5.46% at 60% LTV, 5.75% at 90% LTV and 6.08% at 95% LTV.
Source: Muttuo analysis using Moneyfacts average five-year fixed mortgage rates, August 2026. Assumes a £250,000 capital-and-interest repayment mortgage over 30 years. Figures are illustrative, exclude fees and do not represent a lender affordability assessment.
What the data tells us
Smaller deposits come with a higher monthly cost.
High-LTV mortgages remain widely available, but borrowers needing to finance a larger share of the property price generally face higher rates and repayments.
Wage growth has not closed the gap
Higher wages are supporting household finances, but income growth has not been strong enough to fully restore mortgage affordability. ONS data shows regular earnings grew 3.5% annually in April to June 2026, while real regular pay growth was just 0.5%.
Real pay growth matters because mortgage affordability depends on what households have left after wider living costs, not simply how much their salary has risen in cash terms.
+0.5%
Real regular pay growth
ONS, April to June 2026
Our earlier £1,500-a-month illustration showed that the mortgage supported at the average two-year fixed rate was around 6.7% lower than a year earlier. That is not directly comparable with earnings growth, but it reinforces the wider point: rising incomes have not yet fully offset the effect of higher borrowing costs.
What the data tells us
Higher wages have not fully closed the affordability gap.
Real earnings are growing, but only modestly, leaving borrowing costs as a significant constraint on how far household budgets can stretch.
Buyer activity has lost momentum
Greater mortgage choice has not translated into stronger buyer activity. Bank of England data shows house-purchase approvals fell to 56,100 in July 2026, from 58,200 in June, leaving them below the previous six-month average of around 60,800.
The recent pattern has been uneven. Approvals reached around 66,000 in April before falling sharply in May and remaining subdued through June and July. This suggests buyer demand is still sensitive to mortgage pricing and affordability.
Mortgage approvals have lost momentum
Monthly UK mortgage approvals for house purchase, July 2025 to July 2026.
Note: Seasonally adjusted net mortgage approvals for house purchase. Figures are rounded for display.
Source: Bank of England, Money and Credit, series LPMVTVX. Latest available data: July 2026.
Completed sales also softened in July. HMRC recorded 96,710 seasonally adjusted UK residential property transactions, down 2% from June and 1% from a year earlier. Because completions typically occur two to four months after an offer is made, transactions are a lagging indicator rather than a measure of current buyer demand.
Together, below-average approvals and softer completed sales suggest that greater access to mortgage products has not yet produced a sustained recovery in activity.
What the data tells us
Mortgage supply has recovered faster than buyer demand.
Approvals and completed transactions remain subdued, suggesting that greater mortgage choice alone is not enough to bring buyers back into the market.
More stock is strengthening buyer leverage
More housing supply is strengthening buyers’ negotiating position. With more properties competing for cautious demand, buyers have greater scope to compare homes, negotiate on price and walk away where the numbers do not work.
Rightmove reports that the number of homes available for sale is at a 12-year high for this time of year. Average stock per estate agency branch reached 65 properties in both June and July 2026, up from 56 in January.
Buyer choice has increased through 2026
Average number of properties available per estate agency branch across the UK.
Note: Average stock per agent includes properties that are under offer or sold subject to contract.
Source: Rightmove House Price Index, January to July 2026.
Greater competition is also showing in seller pricing. The average asking price of a newly listed property fell 2.0% in August to £364,999, leaving asking prices 1.0% lower than a year earlier.
Zoopla data points in the same direction. Annual UK house price growth slowed to 0.9% in July, while the number of homes for sale was 5% higher than a year earlier and sales agreed were 6% lower.
Buyer interest may be improving, with Zoopla recording property searches 7% higher than a year earlier in the four weeks to 16 August. But stronger search activity has not yet produced the same recovery in agreed sales, suggesting buyers remain selective on both property and price.
What the data tells us
More housing supply is giving buyers greater leverage.
With more properties competing for cautious demand, buyers have greater scope to negotiate and reject asking prices that do not reflect current affordability.
Mortgage stress remains relatively contained
The affordability squeeze is restricting new borrowing, but it is not translating into widespread payment stress among existing homeowners. UK Finance recorded 77,940 homeowner mortgages in arrears of 2.5% or more in Q2 2026, 1% fewer than in the previous quarter. Arrears represented 0.89% of outstanding homeowner mortgages, down from 0.91% in Q1.
Homeowner mortgage arrears have fallen
Quarterly number of homeowner mortgages in arrears of 2.5% or more of the outstanding balance.
Note: UK Finance classifies a mortgage as being in arrears when arrears reach 2.5% or more of the outstanding balance.
Source: UK Finance Mortgage Arrears and Possessions. Q1 2024 to Q2 2026.
Arrears have also fallen materially from their 2024 peak. There were 96,420 homeowner mortgages in arrears in Q1 2024, compared with 77,940 in Q2 2026, a reduction of around 19%.
Possessions remain low by historic standards. In Q2 2026, 1,150 homeowner mortgaged properties were taken into possession, 8% fewer than in the previous quarter.
What the data tells us
Affordability pressure has not become widespread mortgage distress.
Falling arrears suggest the current adjustment is happening mainly through weaker demand, lower borrowing capacity and more cautious purchasing decisions rather than widespread payment failure.
What this means for borrowers
Different borrowers feel the affordability squeeze in different ways, depending on their deposit, current mortgage and whether they are buying or refinancing.
First-time buyers
Higher-LTV mortgages remain widely available, but smaller deposits generally mean higher rates and repayments, which may require a lower property budget.
Home movers
Movers may have more equity, but the mortgage needed for the next property can still be more expensive, while greater housing supply may create more room to negotiate.
Remortgagers
The key issue is often the change in monthly payment when a fixed deal ends, making it important to review lender, rate and term options before expiry.
Larger-deposit buyers
Larger deposits generally unlock more competitive mortgage pricing and may also strengthen a buyer’s negotiating position in a better-supplied housing market.
The practical takeaway
More mortgage choice does not automatically mean greater affordability.
Rates, deposits and mortgage terms ultimately determine how far a borrower’s monthly budget can stretch.
What to watch next
The next phase of the market will depend on whether borrowing costs, incomes and property prices begin to move back into better alignment.
01
Mortgage pricing
The effective rate on newly drawn mortgages rose to 4.45% in July 2026. A sustained fall in new mortgage pricing would begin to restore some of the purchasing power lost this year.
02
Buyer activity
House-purchase approvals fell to 56,100 in July, below the previous six-month average. A sustained recovery would be a clearer sign that improved mortgage availability is translating into demand.
03
Wage growth
Real earnings are still growing, but only modestly. Stronger real wage growth would give households more room to absorb housing costs without placing additional pressure on monthly budgets.
04
House prices
Annual UK house-price growth stood at 2.0% in June. Further moderation could help affordability if borrowing costs remain elevated.
05
High-LTV pricing
The rate gap between lower- and higher-LTV mortgages will remain particularly important for first-time buyers. More competitive 90% and 95% LTV pricing could improve affordability even without a large fall in headline mortgage rates.
The signal to look for
A stronger recovery will require more than greater mortgage choice.
The clearest signal would be lower borrowing costs, improving real incomes, firmer mortgage approvals and contained house-price growth appearing together.
MUTTUO VIEW
Muttuo view
The UK mortgage market has made clear progress in restoring product choice, but affordability has not recovered at the same pace.
Higher borrowing costs are still limiting purchasing power, particularly for buyers with smaller deposits, while wage growth has only partly offset the pressure. The effect is visible in subdued mortgage approvals, softer housing activity and greater competition between sellers.
At the same time, falling arrears suggest that the market is adjusting through more cautious borrowing and weaker demand rather than widespread financial distress.
A stronger recovery will require borrowing costs, household incomes and property prices to move into better alignment.
Our view is that affordability, rather than access to credit, remains the defining constraint in the UK mortgage market.
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Methodology and sources
This analysis combines the latest available UK mortgage, housing, earnings and borrower-performance data from official and established industry sources.
Muttuo prioritises primary datasets from the Bank of England, ONS, HM Land Registry, HMRC, FCA and UK Finance. Data from Moneyfacts, Rightmove and Zoopla is used where it provides more timely insight into mortgage pricing, product availability and housing-market conditions.
Some figures are calculated by Muttuo using published source data. Mortgage illustrations assume a standard capital-and-interest repayment mortgage and exclude product fees unless stated otherwise. They are illustrative only and do not represent an individual lender affordability assessment.
Because datasets are released on different schedules, the latest observation varies between sections. Relevant dates are shown alongside figures and charts.
Key sources
- Bank of England – Money and Credit, June 2026
- ONS – Average Weekly Earnings, April to June 2026
- UK House Price Index – June 2026
- HMRC – Monthly Property Transactions, July 2026
- FCA – Mortgage Lending Statistics, Q1 2026
- UK Finance – Mortgage Arrears and Possessions, Q2 2026
- Moneyfacts – UK Mortgage Trends Treasury Report, August 2026
- Rightmove – House Price Index, August 2026
- Zoopla – House Price Index, August 2026