"Since the Bank of England began to increase interest rates homebuyers have seen the cost of borrowing climb and the average monthly mortgage repayment is now considerably more expensive, at a time when households are already stretched extremely thin"
The latest research by property purchasing specialist, House Buyer Bureau, looked at the current cost of a mortgage across a range of the most common products available to homebuyers and how this cost has changed when compared to the rates available in December 2021 as interest
The research shows that today, a homebuyer opting for a two-year fixed-rate mortgage with a 95% loan to value (LTV) will predictably pay the highest price to get a foot on the ladder. With an average rate of 6.11%, the monthly cost of repaying this mortgage comes in at £1,793 per month, having increased by a notable 52.2%, or £615 per month, since December 2021.
However, it’s those opting for a two-year fixed rate at a 75% loan to value who will have seen the largest percentage increase in the cost of their monthly repayment. Back in December 2021, opting for a two-year fixed at a rate of 1.57% would have seen buyers repaying £811 per month.
Today, the same mortgage would require a monthly repayment of £1,292 at the current rate of 5.17%. That’s a 59.4% increase, meaning buyers are now paying £481 more per month.
Those opting for a three-year fixed at the same 75% LTV will also be paying 58.9% more per month at the current rate of 3.54% versus December 2021 - an increase of £468 on the monthly cost of repaying their mortgage.
Despite a string of 11 consecutive interest rate hikes, it’s those purchasing on a standard variable rate who have fared best in the current market.
The research by House Buyer Bureau shows that the average rate has increased from 3.61% in December 2021 to 6.66% today. While this has pushed the average monthly repayment to £1,489, it’s the smallest increase, up 46.2% or £471 per month.
Chris Hodgkinson, Managing Director of House Buyer Bureau, commented: “Since the Bank of England began to increase interest rates homebuyers have seen the cost of borrowing climb and the average monthly mortgage repayment is now considerably more expensive, at a time when households are already stretched extremely thin.
"This has predictably had an impact on the wider market, with buyers no longer able to match the high asking price expectations seen throughout the pandemic boom. As a result, house prices have cooled and, in many cases, buyers have had to reassess their position in the market having already made an offer.
"This has led to a higher degree of market uncertainty and while we don’t anticipate any drastic reduction in property values as a result, it’s certainly a much trickier landscape for both buyer and seller at present.”
