Monthly mortgage payments set to increase by £1,300 per year by the end of 2022

Founded in 2020, Revolution Brokers (RB) is a telephone-based mortgage broker specialising in commercial and buy-to-let portfolios.

RB looked at the average monthly cost of repaying a mortgage based on the average property value minus a 15% deposit and using the average standard variable rate mortgage fee for a 25-year term, as well as how this has changed over the last decade after adjusting for inflation. 

Based on the average UK house price of £278,071 (2022 to date), minus a deposit of £41,711 (15%), UK homebuyers require a mortgage loan of £236,360 in the current market. 

With the current average rate for a standard variable rate mortgage at 5.17%, the average homebuyer is repaying £1,405 per month. 

Adjusted for inflation, this is 26% higher than just five years ago (£1,115) and 56% more per month than the average repayment of £899, 10 years ago.

This increased monthly cost has been driven by the increased cost of buying a home, with the average UK property increasing in value by 65% in the last decade, while the average standard variable rate has increased by just 0.95% in the last ten years. 

Unfortunately, cost increases are predicted over the coming months that will further increase the monthly cost of repaying a mortgage. 

By the end of this year alone, house prices are predicted to climb by a further 2.3%. The bad news for the nation’s homebuyers is that the average mortgage rate is also expected to increase by 0.5%. 

This is a far higher rate of increase in just a few short months than the 0.16% increase seen over the last five whole years and more than half that seen over the last decade (0.95%).

This would see the average monthly cost of repaying a standard variable rate mortgage climb by £107 per month to £1,512 (+8%) - squeezing household finances by almost £1,300 more per year. 

Founding Director of Revolution Brokers, Almas Uddin, commented that: “It’s looking like a tough couple of months ahead”, and that: “Mortgage rates are also set to spike by quite some margin when compared to the increases seen over the last decade.”

He continued: “For those looking to get a foot on the ladder, it means their monthly mortgage repayments will now be significantly higher” while existing homeowners: “Will also see their household finances squeezed much further.”

Almas concluded that: “The silver lining is, that so far, property values have seemed impervious to the wider economic backdrop and so while the cost of homeownership is climbing, it remains a very sound investment.”