More than a year of rising interest rates mean that that average homeowners looking to remortgage will pay over £23,000 more in interest over the course of a new term, data from Octane Capital shows.
The specialist lender adds that a homebuyer who bought yesterday faces a paying almost £7,000 more in interest compared to those who secured a mortgage at the start of the month.
The firm bases its data on the average rate for a five-year fixed term mortgage, which sat at 5.83% yesterday, up from 5.17% since the start of June, according to Moneyfacts research. It also uses the current average house price of £286,489 and a 25-year term mortgage at a 75% loan to value.
Remortgagers will see the biggest rise in mortgage costs, the lender says.
Five years ago, the average homebuyer secured a five-year fixed term at an average rate of 1.99%.
This saw them pay £725 per month or £43,505 over the five-year fixed term, with £15,704 of this total paid in interest.
Today, remortgaging to another five-year fixed term on the remaining mortgage balance £143,465 at the average rate of 5.83% would see their average monthly mortgage repayment increase to £1,014, a jump of £289 per month.
Despite borrowing less, the full cost of their mortgage during their second five-year term would also rise to £60,829 — a £17,324 uplift.
A notable £38,821 of this £60,829 will be paid in interest, meaning the interest paid on their second five-year term will jump by £23,117.
Meanwhile, the average new homebuyer now faces a monthly mortgage repayment of £1,362, or £85 per month more compared to the start of the month.
The firm says over the lifetime of a five-year fixed mortgage term, this will see homeowners pay £81,729, with £59,621 of this being interest on their mortgage at the current average rate of 5.83%.
This an increase of £6,998 in interest paid over the five years when compared to those who committed to the same mortgage at the start of June at the lower rate of 5.17%.
The data comes after the Bank of England hiked the base rate by 50 basis points to 5% last week, its 13th rate rise in a row since December 2021, taking it to the highest level in 15 years.
Octane Capital chief executive Jonathan Samuels says: “Homebuyers are facing a notable increase in the cost of securing a mortgage as a result of increasing interest rates and this means they will be paying a substantially higher level of interest over their fixed term, while also paying less capital back on the value of their home.
“However, it’s those currently coming to the end of a fixed term who stand to see the biggest hike, having previously locked in a far lower rate.
“For those coming to the end of a five-year fixed term, the monthly cost of their mortgage is likely to increase by hundreds of pounds a month.
“Not only this, but the average homeowner will now be paying upwards of £23,000 more in interest over their second five-year term, despite their mortgage balance being less than when they originally purchased.”
