Devastating hit for homebuyers as mortgage costs climb

As governmental changes sweep through the nation, countless elements within the property sector have been affected, including mortgages.

Market analysis by specialist property lending experts, Octane Capital, has disclosed that the average cost of a mortgage has skyrocketed by as much as 34%, adding hundreds of pounds a month to mortgage repayments for homebuyers who are already bearing the weight of the cost-of-living crisis.

Chief executive officer of Octane Capital, Jonathan Samuels, commented: “It seems as though every day there’s yet more gloomy news around the ever-increasing cost of living and, unfortunately, the cost of borrowing to fund a property purchase is just one household finance that is climbing at a considerable rate.”

“Since the first of numerous interest rate increases in December of last year, lenders have had to react to a landscape that has become increasingly uncertain and volatile.”

“This means that regardless of what mortgage product you opt for, those looking to purchase now will be paying hundreds of pounds more a month compared to just a few months ago.”

“With the Bank of England also due to increase interest rates again this week, this cost is only going to increase, and many lenders will have already been adjusting their rates in anticipation of another base rate increase”, Samuels concluded.

The cost of the average full monthly mortgage repayment for homebuyers entering the market via four of the most common mortgage products was investigated by Octane Capital, as well as how these products have changed since the first base rate increase back in December of 2021.

The results, in summary, show that the most expensive route for a homebuyer, when negotiating the current mortgage market, is a two-year fixed rate mortgage at a 95% loan to value (LTV) which requires the highest monthly repayment.

Priciest mortgage products presently

With an average fixed rate of 3.97%, up from 2.77%, in December, homebuyers opting for this product in the market will be required to repay £1,460 having placed a 5% deposit, to begin with.

Those who choose a standard variable rate product and place a 25% deposit are also paying some of the highest costs currently. With the highest average rate of 4.54%, again, up from 3.61% since December, homebuyers are facing an average monthly repayment of £1,179.

It should be noted that both products have seen the cost of a monthly repayment increase by 23% and 19% respectively – a lower rate of increase compared to both a two- and three-year fixed product at a 75% LTV.

Most significant increase in mortgage rates and repayments

The average mortgage rate on a two-year fixed mortgage has seen an enormous increase, climbing by 1.94% since December of last year, now averaging 3.51%. At 3.31%, the average rate available for a three-year fixed mortgage is now 1.92% higher than it was previously back in December.

As a result, the average monthly repayment for both two and three-year fixed mortgages has soared by 34% so far this year, with the average monthly cost of a two-year fixed mortgage up by £284 per month to £1,098.

Additionally, the average three-year product is now £274 more expensive for the average repayment, costing a whopping £1,075.