Our new Generational Affordability Index shows a shift in mortgage repayment patterns across generations. These figures have been inflation-adjusted, to enable a comparison of how mortgage repayments have evolved in real terms. By adjusting historical payments to reflect 2024 prices, the index provides an analysis of housing costs across different generations.
The index shows that Millennials are facing an unprecedented challenge. Unlike their predecessors, the Millennial generation is set to experience much higher mortgage costs during the second half of their mortgage term.
Millennials began buying their first homes in the shadow of the 2007 crash when house prices were rising and mortgage rates were falling. Initially, despite buying at much higher house prices compared to previous generations, their mortgage repayments were similar in real terms thanks to record low interest rates.
However, recent years have seen a dramatic shift. Our analysis shows that during the first five years of their mortgage, Millennials paid an average of £863 per month in 2024 prices. This compares to £923 for Generation X and £775 for Baby Boomers (all in 2024 prices). Figures which are remarkably similar.
The difference lies in the future trajectory of these payments. Unlike previous generations, who generally benefitted from rates falling over their mortgage term, Millennials have been uniquely squeezed. They've taken on substantial debt at record-low rates, only to see those rates rise in recent years.
Our analysis reveals that Millennials have only made around 39% of their total projected mortgage repayments during the first half of their 25-year term. In contrast, Baby Boomers had paid 59% and Generation X 60% at the same stage. This means Millennials still have 61% of their mortgage to repay in the second half of their term.
This change of trajectory is likely to have wider social consequences. Higher mortgage payments will squeeze Millennials at a time when they're starting families and their careers are close to peaking. Money that previous generations invested or enjoyed will likely be tied up in mortgage bills for Millennials and Gen Z for the foreseeable future.
The timing of the mortgage rate rise over the last few years has also created an intergenerational divide, with older Millennials who bought early at low pre-Covid rates already repaying a significant portion of their mortgages. In contrast, younger Millennials and subsequent generations buying later at higher prices and rates, are projected to pay much more over the long term.
For Generation Z, things perhaps look even more challenging. As they start to buy, they face mortgage repayments nearly double those of Millennials when they first bought (£1,739 per month compared to £863). This reflects the combination of record-high house prices and relatively high interest rates.
