Average monthly mortgage payments have risen by 39% over the past five years, new research by specialist property lending experts Octane Capital reveals.
Octane analysed the current monthly cost of a mortgage based on the average mortgage rate and a 80% LTV and how this has changed over the last five and 10 years after adjusting for inflation.
The research shows that between 2018 and 2023, monthly mortgage payments rose by 39%, from £1,008 per month to £1,404.
This compares to an increase of just 4.3% from 2013 to 2018 (£966 to £1,008).
Octane says that between 2013 and 2018 typical mortgage rates fell from 3.79% to 2.34%, which kept the cost of monthly repayments low despite prices rising.
House prices surged by 22.2% in five years from £234,000 in 2013 to £286,000 in 2018.
Rather than mortgage affordability, the challenge for buyers in 2018 was finding a bigger deposit, as typical 20% deposits rose from £46,800 in 2013 to £57,200 in 2018.
Octane says that since 2018, however, house prices have only risen by 1% to around £287,500 in 2023, as escalating mortgage rates have become the problem,
In contrast, as of September 2023, average mortgage rates have rocketed to 5.44% as the Bank of England made 14 consecutive base rate rises in a bid to keep inflation under control.
Octane Capital chief executive Jonathan Samuels says: “The cost of repaying a mortgage is considerably higher in today’s market than it was just five years ago and much of the increase seen over the last decade has come since 2018.
“This pain has arguably been prolonged by the Bank of England who have been cautious, to say the least, in their attempts to manage inflation.
The current climate is likely to block the aspirations of many who want to own their own home although there has been signs of positivity this week, as some lenders have reduced their fixed rate offering to below the five per cent threshold.
“However, it’s extremely likely we will see the Bank of England increase the base rate yet again this week and so it’s unclear how long this period of increased mortgage affordability will last.”
