Homeowners across the UK are facing a severe financial crunch as average mortgage payments have jumped by £5,484 annually. The sharp increase in mortgage rates over the past 2 years has left many reeling under the pressure of higher monthly expenses.

According to data from Mojo Mortgages, the average mortgage rate for remortgaging in April of this year hit a hefty 5.33%. This figure is almost three times higher than it was in April 2022, when homeowners enjoyed a much lower rate of 1.78%. This significant rise in rates reflects broader economic trends, particularly actions taken by the Bank of England (BoE).

Bank of England’s Strategy

In an effort to tackle the persistent issue of inflation, the BoE has progressively raised the base rate from a mere 0.1% in late 2021 to a robust 5.25% currently. These increases are directly impacting mortgage rates, making home loans considerably more expensive for average homeowners.

The Real Impact on Your Wallet

For homeowners who borrowed £250,000 over 20 years, the bite is quite harsh. Back in April 2022, the monthly payment for such a mortgage was around £1,238. Fast forward to last month, and that figure has escalated to £1,695—a steep increase of £457 every month. When calculated annually, this equates to an additional £5,484 in mortgage payments.

For those on a two-year fixed-term rate, the total extra cost over the period would reach an eye-watering £10,968.

A Rise in Home Repossessions

Further compounding the issue, recent figures from UK Finance have shown a worrying 36% rise in the number of mortgaged properties being repossessed in the UK in the first quarter of 2024. Specifically, 870 properties were repossessed between January and March of this year.

Mortgage Arrears on the Rise

The situation is similarly bleak when looking at homeowners falling behind on their mortgages. There were 96,580 homeowner mortgages in arrears of 2.5% or more of the outstanding balance, marking a 3% increase from the previous quarter. Within this group, 32,470 mortgages were in the most severe category, with arrears exceeding 10% of the balance. This subset saw a 6% increase compared to the previous quarter.