The monthly cost of a new mortgage rose by 61% in the year to December 2022 for the average semi-detached house in the UK, the latest data from the Office for National Statistics (ONS).
This data is from a map-based calculator tool launched by the ONS to help keep track of the link between house prices and mortgage rates.
The new tool shows the indicative monthly cost of taking out a new mortgage on the average property.
The average mortgage rate offered by lenders for a five-year fixed rate loan at a 75% loan-to-value (LTV) ratio was 5.05% in December 2022, according to the Bank of England.
ONS data found that this would have resulted in a monthly mortgage repayment of £1,262 if a buyer was purchasing a semi-detached property in the UK at the average December 2022 price of £286,000, with a mortgage term of 25 years.
This is a £481 increase in the monthly repayment compared with the corresponding monthly repayment estimate in December 2021.
Purchasing the average detached UK property on the same terms in December 2022 would have resulted in a monthly mortgage repayment of £2,041 up by 60.7% on December 2021.
For terraced houses, it would have been £1,063 up by 59.6% while for flats and maisonettes, it would have been £1,028 up by 54.6%.
In December 2021, an LTV rate of 75% and a budget of £1,000 per month would have enabled you to afford an average semi-detached property in nearly two-thirds of local authorities in Great Britain.
With the same budget in December 2022, however, you would be able to afford the average semi-detached property in less than a third (30.1%) of areas.
Hargreaves Lansdown personal finance analyst Sarah Coles says: “This lays bare the shocking cost of a new mortgage around the country. For new buyers armed with a reasonable deposit, the options are increasingly limited. Unless you can find some extra cash up-front, you may well end up having to scale back your ambitions.”
“For remortgagers with a decent chunk of equity in the property, the additional costs may be manageable, but those with large loans and little equity have worryingly few options.”
“The HL Savings & Resilience Barometer found that remortgaging this year will typically eat an extra 3.1% of your income. It will mean 2m people will be spending more than a quarter of their household income after tax on the mortgage. At this stage, it puts them at risk of falling into arrears.”
“Some of these people have enough emergency savings to fall back on, but 650,000 of them don’t – which puts them at ‘high risk’ of arrears.”
“Others not only don’t have enough savings, but are already spending more than they earn each month, putting them at ‘critical risk’ – 347,000 people are in this boat. For anyone in this position, there’s the risk that faced with the cost of a remortgage, they can no longer afford to stay in their home.”
The ONS calculator shows that the highest house prices and, therefore, highest mortgage payments across all property types were in the London borough of Kensington and Chelsea.
Average semi-detached houses in the borough were priced at £3.79m in December 2022, resulting in a mortgage payment of £16,718 per month.
This figure assumes a 25-year repayment term, a 75% LTV arrangement, the average five-year fixed mortgage rate, and an increase of £4,002 on the previous year.
The lowest mortgage repayment cost for a semi-detached property on the same terms was in County Durham at £576 per month in December 2022.
This would have cost £470 per month, on average, in December 2021.
AJ Bell head of personal finance Laura Suter adds: “The problem is spread across the UK, with mortgage costs rising above £1,000 a month in two-thirds of the local authorities in Great Britain.”
“The situation is even worse for those wanting a detached house, where a limit of £1,000 a month on mortgage costs would restrict them to just one local authority area in the UK – County Durham.”
“This is a stark comparison to the end of 2021, when you would have been able to buy a property in a third of local authorities around the UK with that same £1,000 a month budget.
“In London, the average detached property would cost £1,758 a month, while in the southeast it would cost £1,178. Based on the average UK salary of £33,280 that cost in the southeast represents 53% of your take-home pay, while in London it’s 80%.”
“Even the cost of flats across the UK are now unaffordable for many, costing almost £700 a month in London and £377 a month in the south-east.
“The figures lay bare the nightmare facing the 1.4m homeowners who need to re-mortgage this year. Some will be able to stomach the higher costs or extend their term to reduce their monthly repayments, but others will find the increases unaffordable on top of other increases to the cost of living.”
“While interest rates have risen across the globe, UK homeowners are far worse off than those in other developed countries to be able to afford their monthly repayments, according to a new report by Fitch Ratings.”
“The expectation is that the number of people missing more than three months of mortgage payments will double this year, as the aftershocks of Liz Truss’ catastrophic mini-Budget are still being felt in the mortgage market.”
“There’s no doubt this will have some knock-on effect on the housing market, with some people shelving plans to upsize their home, while many first-time buyers find their homebuying plans are put out of reach by rising costs.”
