Mortgage borrowers are paying thousands of pounds more each year than they were a decade ago with average mortgage rates having risen sharply since the UK’s vote to leave the European Union.
Research from L&C Mortgages found that the average 2-year fixed remortgage rate offered by the UK’s 10 largest lenders has trebled since the Brexit referendum in June 2016.
At the time of the vote, the average 2-year remortgage rate for borrowers with 40% equity stood at 1.52%. Today, that figure has risen to 4.61%.
And 5-year remortgage rates have also increased significantly, climbing from 2.20% in June 2016 to 4.66%.
FINANCIAL IMPACT
According to L&C’s analysis, repayments on a £200,000 repayment mortgage over a 25-year term are now around £322 per month higher than they would have been ten years ago, equivalent to an additional annual cost of almost £3,870.
Homebuyers have experienced a similar shift. The average 2-year fixed purchase rate for borrowers with a 10% deposit has increased from 2.48% to 4.93% over the same period, while average 5-year fixed rates have risen from 3.29% to 4.84%.
The findings illustrate how dramatically borrowing conditions have changed since a prolonged period of historically low interest rates.
The Bank of England base rate stood at 0.50% when voters went to the polls in June 2016 and subsequently fell to 0.25%. Today it stands at 3.75%.
DRAMATIC SHIFT
Industry figures point out that mortgage pricing has been influenced by a range of factors over the last decade, including the pandemic, inflationary pressures, geopolitical events and periods of market volatility.
David Hollingworth (main picture, inset), Associate Director at L&C Mortgages, says: “The rate environment has shifted dramatically since the referendum and borrowers have had to adapt to a radical change in mortgage costs.
“A lot has happened in the mortgage market over the last ten years but a generation of borrowers that was used to rock bottom interest rates have had to recalibrate.”
He adds: “First-time buyers and homemovers are now navigating a market where rates of close to 5% or more have become typical, which may not dull the desire to buy but does transform how people think about their mortgage choices.”
