Interest rate rises ‘made life difficult’ for homeowners
Mortgage rates in the ten years since the Brexit referendum have as much as tripled, according to research from L&C Mortgages.
Looking at the lowest rates from the top ten UK lenders, the analysis shows average two-year remortgage rates for those with a 40% deposit have trebled, up from 1.52% in 2016 to 4.61% today. Average five-year rates, meanwhile, have more than doubled to 4.66% from 2.20% in 2016.
A £200,000 25-year repayment mortgage would cost £322 more per month, a rise of almost £3870 more each year.
It’s a similar picture for homebuyers, with average two-year purchase rates of 2.48% for those with a 10% deposit, compared to 4.93% today, while five-year rates have risen to 4.84% from 3.29%.
Mortgage rates have risen significantly in recent years, with a host of factors contributing to the shift, including the pandemic, the consequent rise in inflation and market volatility, the mini budget and conflict in Ukraine and the Middle East.
A change in the rate environment
David Hollingworth, associate director at L&C Mortgages said: “The rate environment has shifted dramatically since the referendum and borrowers have had to adapt to a radical change in mortgage costs. The base rate sits at 3.75% today compared to just 0.50% at the time of the vote to leave the EU and then dipping further to 0.25% in the following months.
“A lot has happened in the mortgage market over the last ten years but a generation of borrowers that was used to rock bottom interest rates have had to recalibrate. Ultra-low rates became the norm over a prolonged period, so the rapid uplift has made life difficult for homeowners.
“First-time buyers and homemovers are now navigating a market where rates of close to 5% or more have become typical, which may not dull the desire to buy but does transform how people think about their mortgage choices.
“What does echo 2016 is that political uncertainty persists. The vote to leave resulted in a change of Prime Minister and borrowers today are again wondering what another change at the top will mean for them, following Keir Starmer’s resignation. Markets don’t like uncertainty, so borrowers may face more volatility to come.”
