It has been revealed that mortgage costs have rocketed due to the five interest rate increases implemented by the Bank of England (BoE) since December. The research was carried out by Revolution Brokers and shows that the average cost of a three-year fixed-rate mortgage has grown 21.5% following the fifth rate increase from the BoE.
The research aimed to determine how much more homeowners in the UK will be paying in terms of their monthly mortgage repayments. The research company compared current and historical mortgage rates for variable and three-year fixed mortgages and based the data on the average cost of a UK property. The report revealed how the cost of repayments has changed in the last 12 months due to the base rate increases.
What the data showed
The data showed that a year ago, the average UK house price was £265,809, and buyers borrowed an average of £225,938 after paying a deposit of 15%. This was when the base rate was just 0.1%, and average standard variable rates stood at 3.61%. Monthly repayments based on this data stood at £1,144.47, £679.70 of which was interest.
Based on these figures, property buyers in the UK were paying £38.15 each day in mortgage costs. This continued until December 2021, as the base interest rate remained unchanged up until then.
Due to the base rate hikes since December, average variable rates have increased to 4.91%. As a result, home buyers now pay £1,304.26 each month, with daily mortgage costs rising to £43.38. This equates to an increase of 14% in the 12 months, with households having to find an additional £160 to cover the extra £5.33 per day.
The research also looked at fixed rates, and data shows that in October 2021, buyers could get a three-year fixed rate deal at a rate of 1.12% with a 25% deposit. With average house prices at the time standing at £264,307, this meant monthly repayments of £757.89 for three years.
However, by April this year, the average three-year fixed rate increased to 2.26% due to the base rate increases. This led to monthly repayments rising to £920.72, equating to an increase of 21.5%.
Almas Uddin, the Founding Director of Revolution Brokers, said, “The current cost of living crisis is hitting many households, and with interest rates now 1.15% higher than they were this time last year, many are finding their household income is being stretched even further by the increasing cost of their mortgage. While an additional £5 per day may seem manageable to most, it soon adds up and really does highlight why you’re ill-advised to borrow beyond your means, particularly with a variable rate product.”
Further rate increases to come
The data has shown that the five base rate increases of 0.25% each have already had a significant impact on mortgage repayments. However, officials have warned there are further increases to come as the Bank of England battles soaring inflation. Many believe the August increase could be double that of the previous ones, with some expecting a hike of 0.5%.