Homebuyers could face almost £2,000 a year in additional mortgage costs following the sharp rise in fixed rates since the start of the year.
The average 5-year fixed mortgage rate has reached 6.00%, its highest level since September 2023, according to Moneyfactscompare.co.uk.
On a £250,000 mortgage over 25 years, HomeOwners Alliance calculates repayments at 6% would be £1,611 a month – £158 more than at the 4.94% average rate recorded at the beginning of February.
That equates to an additional £1,896 a year and comes as the number of sub-5% fixed mortgage deals has almost disappeared from the market.
BUYER BUDGETS
Moneyfacts says just nine fixed deals below 5% remain, excluding products available exclusively in Northern Ireland, compared with 1,494 at the beginning of September – a 99% fall.
The average 2-year fixed rate has meanwhile climbed to 5.98%. A £250,000 mortgage over 25 years at that rate would cost £1,608 a month, according to HomeOwners Alliance.
That is £168 a month – or £2,016 a year – more than at the 4.85% average two-year rate at the beginning of February.
Ian Harris, President of NAEA Propertymark, says: “We are seeing first-hand how sensitive buyers are to mortgage rates, and the rapid disappearance of sub-5% deals will inevitably add further pressure to affordability.
“For some buyers, even a relatively small increase in monthly repayments can mean they have to reduce their budget or step back from a purchase altogether.”
RATE PRESSURE
Major lenders repeatedly increased fixed rates during September as wholesale funding costs rose and financial markets remained volatile.
HomeOwners Alliance mortgage expert Sarah Tucker says: “Seeing the average 5-year mortgage rate hit 6% is a real blow for borrowers, particularly those coming off much cheaper fixed deals who are already facing steep increases in other household bills.
“But while it’s important not to panic, it’s also important not to just sit and hope that rates will come back down either.”
HomeOwners Alliance research conducted earlier this year found considerable uncertainty among consumers over the direction of mortgage rates.
Some 23% expected rates to rise, while 25% thought they would fall, 28% expected no change and 24% were unsure.
Harris adds: “This makes realistic pricing and good financial preparation more important than ever.
“Buyers and sellers need confidence that the figures work before committing, while greater stability in mortgage pricing would help restore confidence and keep people moving through the housing market.”
