Select Your Cookie Preferences

We use cookies and similar tools that are necessary to enable you to use our website, to enhance your experience, and provide our services, as detailed in our Cookie Notice. We also use these cookies to understand how customers use our services (for example, by measuring site visits) so we can make improvements.

If you agree, we'll also use cookies to complement your website experience, as described in our Cookie Notice. This may include using third party cookies for the purpose of displaying and measuring interest-based ads. Click "Customise Cookies" to decline these cookies, make more detailed choices, or learn more.

Annual mortgage bills go up by thousands as rates rise

Estate agent 'For sale' sign board with brick houses in the background

Mortgage rates are going up, with borrowers on a variable rate deal -- or taking out a new fixed rate deal -- seeing their monthly repayments escalate.

The average two-year fixed rate recently surpassed the 6% mark for the first time since November 2008, followed a day later by the average five-year fixed rate surpassing 6% for the first time since 2010, according to financial information firm Moneyfacts.

It's worth remembering that these are average rates, and there are lower offers available.

However, between now and the end of 2024 more than five million families are set to see their annual mortgage payments rise by an average of £5,100, according to a new analysis by the Resolution Foundation.

The UK's era of low interest rates is firmly at an end, the think tank said, with the Bank of England on course to have raised its policy interest rate from just 0.25% at the start of this year to over 5% by early next year.

The 1.2 million households across Britain who are on variable rate mortgage deals will see their housing costs rise swiftly in line with the Bank Rate, while the impact on the 85% of mortgage holders on fixed rate deals will build over the coming years as they move on to new deals.

By the end of 2024, 5.1 million households with a mortgage will be spending more on their housing costs as a result of increases in mortgage rates since the third quarter of 2022.

Affected households in London will see the biggest increase. Average payments in the capital are set to rise by £8,000 over the next two years -- more than twice the level of the £3,400 increase for mortgage borrowers in Wales.

Housing market loses momentum

For first-time buyers and home movers, the increase in mortgage rates and the wider cost of living crisis are eroding their purchasing power.

The latest monthly report from RICS, the professional body for surveyors, shows that new buyer enquiries fell for the fifth month in a row in September, as buyer interest dropped in all regions and countries of the UK.

With the market losing momentum, sales fell over the month and the September figure was the most negative reading since May 2020. Sales expectations over the next three and 12 months are also negative.

So far, house prices have been propped up by a lack of supply -- but further rises in mortgage rates are expected to exert pressure on prices over the next 12 months.

The latest data from Nationwide shows a modest slowing in annual UK house price growth to 9.5% in September, from 10% in August.

Between August and September, prices were unchanged after taking account of seasonal effects. This is the first month not to record a sequential rise since July 2021, Nationwide said.

Posted by Fidelius on October 17th 2022

Loading... Updating page...