The average monthly burden of repaying a mortgage has surged by a staggering £314 per month, a 39% rise, over the past ten years, as revealed by specialist property lender Octane Capital.
In a comprehensive analysis of the prevailing mortgage landscape, Octane Capital scrutinized the average cost of a mortgage in today’s market, assuming a 25-year term with a loan-to-value (LTV) ratio of 75%. Their investigation also shed light on how the cost of these mortgages has evolved over the past decade.
The study disclosed that, considering the current average house price of £285,009, an average mortgage rate of 3.85%, and a 25% deposit, the typical monthly mortgage repayment now stands at £1,111.
Octane Capital delved further into historical data to ascertain the monthly cost of the same mortgage a decade ago. After factoring in inflation, their research revealed that the average house price back in 2013 was tantamount to £223,983. At an average mortgage rate of 3%, this translated to a monthly payment of £797, after adjusting for inflation.
Consequently, there has been a staggering £314 increase in the monthly cost of mortgages over the past ten years.
However, Octane’s study unearthed that the lion’s share of this increase occurred within the last five years alone. In 2018, after adjusting for inflation, the average monthly cost of a mortgage was £860, predicated on an average mortgage rate of 1.83% at that time.
Hence, between 2013 and 2018, the average monthly mortgage repayment rose by a mere £64, representing just a fifth of the total £314 increase witnessed over the past decade. The remaining £250, constituting an overwhelming 80% of the escalation, occurred within the last five years.
Octane Capital’s CEO, Jonathan Samuels remarked, “The average cost of a mortgage has seen a considerable surge over the last decade, primarily driven by the escalating cost of homes. However, much of this growth has occurred in the past five years, specifically since December 2021, as interest rates have steadily risen for 12 consecutive periods.”
Samuels added, “With inflation experiencing a notable dip, many prospective homebuyers eagerly anticipate the Bank of England’s decision next month, hoping for a reduction in rates. However, it is unlikely that this will materialize, and we might witness the base rate rise to 5%, thereby further inflating the cost of borrowing.”