Posted on September 23rd, 2022.

The average cost of a mortgage has climbed by as much as 34% since the first interest rate increase in December last year, adding hundreds of pounds a month to mortgage repayments, market analysis by Octane Capital reveals. 

The analysis was based on the cost of the average full monthly mortgage repayment for homebuyers entering the market via four of the most common mortgage products, as well as how the cost of these products has changed since the first base rate increase back in December of last year. 

The most costly route for homebuyers is a two-year fixed rate mortgage at a 95% loan to value (LTV), requiring the highest monthly repayment. 

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

Also paying some of the highest costs are those opting for a standard variable rate product and placing a 25% deposit.

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.

However, 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.

The average mortgage rate on a two-year fixed mortgage has seen the largest 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 back in December. 

As a result, the average monthly repayment for both a two-year and three-year fixed rate mortgage has climbed 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.

Meanwhile, the average three-year product is now £274 more expensive when it comes to the average repayment, costing £1,075. 

Octane Capital chief executive Jonathan Samuels comments: “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.”

Source: www.mortgagestrategy.co.uk