Revolution Brokers looked at how the monthly cost of a variable rate mortgage with a 75% loan to value has changed and what the actual cost to homebuyers is each month after adjusting for inflation.
The research shows that this time last year, the average homebuyer securing a variable rate mortgage, on the average UK house price of £260,575 and at a rate of 3.61%, was repaying £990 per month. However, after adjusting for inflation, this monthly repayment cost actually equated to £1,093.
By the start of 2022, the inflation-adjusted monthly repayment for the same mortgage for a new homebuyer, at a rate of 3.67% and on the average UK house price of £272,833, had climbed to £1,118 per month, an increase of 2.3% - just £25 more per month.
However, fast forward to today and not only has the average house price climbed to £292,118, but the average mortgage rate for a variable rate product at a 75% LTV now sits at 4.89%.
As a result, the average homebuyer is facing a repayment of £1,267 per month. This is £149 (13.3%) per month higher than in January of this year and £174 (15.9%) more than the cost of a monthly repayment this time last year even when taking inflation into account.
But what about those who have already purchased?
The average buyer to have purchased at the start of the year on a variable rate product will have already seen the cost of their monthly repayments climb by 4.4% or £49 per month, even after adjusting for inflation and despite the fact they will have repaid almost £3,000 on their mortgage.
Almas Uddin, Founding Director of Revolution Brokers, commented: “The average rate for a variable rate mortgage has climbed by over 1.2% since the start of this year alone and this is really only the tip of the iceberg with respect to increasing mortgage rates.
"So while those who purchased with a variable rate mortgage at the start of the year may have only seen a marginal increase in their monthly repayments so far, they can certainly expect further hikes over the coming months.
"As it stands, rates remain fairly favourable and so now is the time to consider remortgaging if you’re in a position to do so, with a fixed rate product providing some protection over the impending escalating cost of borrowing.”
