With the Bank of England raising the base rate after remaining at 3.75%  for almost 12 months, and market forecasts that the rate will continue to increase, research by Rettie has indicated pressure mounting on mortgage rates and the broader market. 

The average mortgage payment in Scotland is now around £1,200 per month in Q3 of this year, compared to less than £1,100 at the end of last year.

However, housing demand had a fairly resilient performance with Scottish sales to September this year remaining similar to 2025.

But sales are down 6% in Q3 of this year compared to this year’s second quarter.

Dr John Boyle, director of strategy and research at Rettie, said: “The mortgage market is now out of its period of cautious recovery that had brought down mortgage rates and costs.  

“There has been a reversal in 2026 as a direct result of the Middle East conflict, which is beginning to have a material impact on housing and mortgage markets.”

Boyle added: “The market has coped with steeper rises in mortgage rates and costs before and although the outlook looks bleaker than at the time of our previous report this time last year, the upside is that the housing market does remain active.”

The average mortgage payment stands below the average private rent in Scotland by approximately 4%. 

The number of mortgage approvals has decreased by 19% year-on-year to the end of September in the UK. 

First-time buyers constitute over 50% of mortgage sales in Scotland and the wider UK.

Rettie has also found that affordability pressure - which can be measured through ating the percentage of the average gross household income spent on the mortgage payment for the average house - is increasing.

Historically, Edinburgh has been the least affordable city in Scotland on this measure, with the average mortgage payment accounting for nearly 50% of the average home in 2023.  

But now the average mortgage payment in Edinburgh is back up to 38% of the average household income in the third quarter. 

In Glasgow, the average mortgage payment accounts for 27% of average household income.

This remains in line with the national average but is now also on a rising trend. 

Alan Cumming, head of sales and Financial Services at Rettie, said: “The findings in this briefing provide a clear reminder of the affordability pressures facing borrowers. 

“Against that challenging backdrop, it is worth recognising that property prices across many parts of Scotland remain comparatively affordable against much of the rest of the UK.

“And it’s also important to remember that the housing market has continued to thrive through previous periods when interest rates were higher.”

Cumming added: “For homeowners whose current fixed-rate mortgage deal is due to end within the next 12 months, the message is clear, namely seek advice early.  

“Working with a mortgage broker who provides access to a wide range of products can help borrowers understand their options and secure the most competitive rate available in the circumstances.”