The cost of mortgage repayments has skyrocketed by 60% since 2021, according to recent data from Zoopla. This increase has left many buyers grappling with significantly higher expenses as they face the challenges of purchasing a home in today’s economic climate.
For the average UK homebuyer, securing a mortgage in 2024 means shelling out an additional £4,320 annually compared to three years ago. In hard figures, what was a manageable £7,000 per year in 2021 has jumped to a steep £11,400 today.
This spike in mortgage costs has hit southern England particularly hard. Londoners, for instance, now face a daunting £23,000 in annual mortgage payments, up from £15,000 in 2021, an increase of £7,500. Neighbouring regions are experiencing similar trends, with annual repayments up by £6,000 in the South East and £5,300 in the South West.
However, the burden is somewhat lighter in other parts of the country. Homebuyers in the Midlands and the North East are seeing increases of £3,900 and £2,350 respectively.
Regional Impact and Market Analysis
Richard Donnell, Executive Director of Research at Zoopla, said, “At a regional and country level, there has been a 50% to 70% increase in mortgage repayments for a typical buyer between 2021 and 2024. The largest monetary impact is in southern England where house prices are higher.”
Donnell further explains that two-thirds of this hike is due to rising mortgage rates, while the remaining one-third stems from an average 13% increase in house prices since March 2021.
The Ripple Effects of Rising Rates
The hike in mortgage rates began in late 2022 and continued into the summer of 2023, primarily as a response to climbing inflation rates. This has not only reduced purchasing power for potential buyers but has also led to a significant decline in housing market activity.
Despite a slight recovery, with average mortgage rates for a five-year fix at 75% loan-to-value recently falling back to 4.5%, affordability remains a critical issue. Experts anticipate that mortgage rates will stabilise around 4.5% throughout 2024, yet the financial strain on buyers continues unabated.
Additional Costs and Market Dynamics
The increased cost of mortgages is compounded by stamp duty, particularly in the south of England where this tax is more prevalent due to higher property prices. Stamp duty kicks in at £425,000 for first-time buyers and £250,000 for home movers in England, which significantly adds to the overall cost of buying a home.
Donnell notes, “It’s not just mortgage costs that impact buying decisions. Higher house prices also mean stamp duty costs are much greater across southern England, adding to buying costs.”