The increases are hitting first-time buyers especially hard because of the speed at which lenders change rates, Strutt said. “People want to take the time to think things through, but if they wait a week, their mortgage rate could go up a percentage point. »
In one case, a lender raised its rates twice a week.
“A client wanted a five-year fixed rate rental mortgage. We quoted 2.79pc, with monthly payments at £580. That rose to 3.19pc and payments of £661. This means the owner will pay 69% more than their current monthly payments of £390.
Another customer had his listed monthly mortgage payments jump £118 because he took two weeks to return a form, Mr Strutt said.
Sarah Coles, of Hargreaves Lansdown, an investment firm, said there was an imminent risk for the 1.3 million people coming to the end of fixed-rate deals this year. “Average mortgage rates are the highest we’ve seen since 2013. A huge number of people are going to have to stretch their money further,” she said.
Mortgage broker Lewis Shaw, of Shaw Financial Services, said rising costs could push homeowners to sell when they come to the end of their solution.
“With the energy price cap set to skyrocket in October, the cost of fuel at record highs and now significant mortgage rate hikes, homeowners are facing a perfect storm,” he said. declared.
Freddie Poser of campaign group PricedOut said rising interest rates would widen the gap between buyers who could afford to pay cash and those who needed a mortgage.
Rising interest rates have a dramatic effect on the amount of money mortgage borrowers pay their lender over the course of their loan. Of course, rates change over the life of a mortgage, but to put this into context: if the bank rate were 1.25% for the entire mortgage term of 25 years d an average buyer in London, assuming that meant a rate of 2.8%, they would pay a total of £155,329 in interest to their lender.
While a buyer buying with cash would pay £529,829 for the property, a buyer buying with a mortgage (including their 25pc deposit) would end up paying £685,158 – 29pc more.
This assumes that house prices remain stable for the duration of the mortgage. In reality, the growth in prices allows a borrower to acquire more equity in his property when he repays and therefore to benefit from a lower interest rate.
But the numbers show how far more exposed mortgage buyers are than those buying with cash.
Homeowners can lower their bills by overpaying their mortgage, Strutt said. “The sooner you can pay it back, the sooner the costs will be reduced,” he said.
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