THE average home-owner looking to remortgage in the current market will pay more than £23,000 more in interest over the lifetime of their new mortgage term, a lender has claimed
And Octane Capital says today’s home-buyers face a paying almost £7,000 more in interest compared to those who secured a mortgage at the start of the month.
On Thursday the Bank of England implemented its 13th consecutive interest rate increase, bringing the base rate up to 5 per cent - the highest since April 2008.
Specialist property lender Octane has analysed what this means for UK home-buyers and owners when it comes to the cost of borrowing in order to climb the property ladder.
According to Moneyfacts, the average rate for a five-year fixed term mortgage now sits at 5.83 per cent, up from 5.17 per cent since the start of June.
So based on the current UK average house price of £286,489 and a 25-year term mortgage at a 75 per cent loan to value, this means the average home-buyer is now facing a monthly mortgage repayment of £1,362 - or £85 per month more compared to the start of the month.
Over the lifetime of their five year fixed mortgage term, this will see them pay £81,729, with £59,621 of this being interest on their mortgage at the current average rate of 5.83 per cent.
That’s 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 per cent.
But it’s those looking to remortgage who are set to see the biggest increase in their mortgage costs.
Five years ago, the average home-buyer secured a five year fixed term at an average rate of 1.99 per cent. 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 per cent 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 increase to £60,829 - a £17,324 jump.
A whopping £38,821 of this £60,829 will be paid in interest, meaning the interest paid on their second five-year term will increase by £23,117.
Octane Capital chief executive Jonathan Samuels said: “Home-buyers 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 home-owner 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.”
