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2 million mortgage borrowers face average payment hikes of over £1,000 per year

TotallyMoney, the credit app which helps everyone move their finances forward, warns borrowers of significantly higher mortgage payments resulting from the Bank of England’s interest rate rises.

  • A 1% BoE interest rate rise would increase mortgage payments by £99 p/m or £1,188 p/a for a 75% LTV mortgage on the average UK property costing £270,708*
  • Full regional breakdowns show this increases to £191 p/m or £2,292 p/a for a 75% LTV mortgage on the average London property costing £519,934*
  • 1 in 4 mortgage customers currently have no protection against interest rate increases and are already facing higher payments**. This will increase as fixed-rate deals come to an end and customers are moved onto standard variable rate mortgages
  • Existing fixed-rate mortgages are becoming more expensive, and product choice is shrinking†

This comes as households are being stretched to the brink, with the latest ONS figures showing real wages have fallen by 1.2%§, resulting from soaring inflation which is expected to hit a 40-year high of around 11% in Q4 2022‡. 

Regional differences the impact

With the Bank of England’s interest rate continuing to rise, Moneycomms research commissioned by TotallyMoney looks at the impact of an increase to 1% above its 2021 level of 0.1% on mortgage payments, using house price figures from HM Land Registry.

With the UK’s median loan-to-value (LTV) ratio at 73.46%‖, the research is broken down by LTVs of 60%, 75%, 90% and by region, based on a 1% rate increase on a 25 year mortgage term. The full table, including breakdowns, can be found here:

https://www.totallymoney.com/interest-rate-rise-mortgages.pdf.

The average UK property costing £270,708 will see an annual increase in mortgage repayments of £1,188 on a 75% LTV mortgage with a 1% interest rate rise. This increases to £1,440 for those with a 90% LTV ratio and is £948 for a 60% LTV mortgage.

Unsurprisingly, Londoners would see the biggest increases to their mortgage repayments. With a 1% base rate increase, the average home costing £519,934 would see annual mortgage payments increase by £1,824, £2,292, £2,760 on respective 60%, 75%, and 90% LTV mortgages.

With 850,000 properties on tracker mortgages and 1.1 million on Standard Variable Rates, 1 in 4 UK households are already exposed to changes in the Bank of England’s base rate. Additionally, people looking to secure new deals will find that while the number of options are reducing, those still available are getting more expensive.

This comes as separate research from TotallyMoney and PwC shows that 8.9m adults exhibit signs of financial fragility¶. A group who has already had their income negatively impacted by the pandemic or to struggle to make repayments on their borrowing in the next year.

Alastair Douglas, CEO of TotallyMoney comments:

“As the Bank of England increases the base rate to ease inflationary pressures, the 2 million homes on variable-rate and tracker mortgages will see their household finances squeezed even more. 

“And the situation isn’t going to get much better for those nearing the end of their current deals. They have a choice of facing the more expensive SVR or having to switch to a new, and more expensive fixed-rate product. 

“Customers feeling the squeeze from the increased cost of living should consider cutting back on using expensive credit lines such as overdrafts, and move interest-bearing credit card balances to a 0% offer. By reducing the interest being paid, customers can repay their debts quicker, or use the money saved to cover other costs.

“At TotallyMoney we’re on a mission to help everyone move their finances forward. One way we’re doing this is by putting customers in control of their own financial data so that they can move towards a better financial future.”

#ENDS

Sources

* Moneycomms research commissioned by TotallyMoney

** UK Financ

Moneyfacts

Pw

§ ON

‖  Statist

TotallyMoney & PwC


For more information, please contact the press team

About TotallyMoney

TotallyMoney is the credit app on a mission to help everyone move their finances forward.

With over four million customers and a focus on the,one in three UK adults financially under-served by the credit industry.

TotallyMoney believes people’s financial data should work for them, and not against them. Its service provides a free live credit report and score to help customers understand their financial position, and personalised recommendations so they can start creating financial momentum.

TotallyMoney works closely with leading lenders, to ensure eligible customers are matched with the right products, underpinned by its robust data, product and tech capabilities.

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We're on a mission to help everyone move their finances forward and gain financial momentum.


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