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The Analysis Comment
Mortgage interest payments down 22%
Mortgage repayments are becoming more aff ordable
Geoff Garrett Director, Henry Dannell
Our research has revealed how the cost of a mortgage for today’s homebuyers is 22% more aff ordable than it has been over the last three decades. The research looked at the cost of the average
mortgage back in 1991 and how it compares to today once adjusted for infl ation.
Average cost The research shows that today, the average property will cost you £274,712 and at a loan to value of 95%, this requires a deposit of £13,736 with homebuyers borrowing the remaining £260,977. Based on a 25-year term and an average
mortgage rate of 3%, the nation’s homebuyers are currently paying interest
of £652 per
month, with the average cost of repaying their mortgage coming in at £1,238. 30 years ago, the average property would
have cost £57,435 in total, with a deposit of £2,872 required before borrowing the remaining £54,563.
Mortgage rate While the average mortgage rate was far higher at 8%, this meant the average homebuyer was paying interest to the tune of £365 per month with mortgage repayments sitting at £421. However, what does this look like once adjusted for infl ation?
House prices House prices have climbed considerably since the 1990s and so even after adjusting for infl ation, the average cost of repaying a mortgage in 1991 still sits at just £962. This means that the £1,238 paid by today’s homebuyers is 29% higher than 30 years ago.
Interest only However, the average cost of an interest-only payment in 1991 climbs to £832 per month
March 2022
www.CCRMagazine.com 11
House prices have climbed considerably since the nineties and so even when adjusting for infl ation, the current cost of repaying a mortgage is always going to be higher than that faced by homebuyers historically
once adjusting for infl ation. This means that the £652 in interest paid per month by today’s homebuyers is -22% less than the predecessors 30 years ago.
Climb
House prices have climbed considerably since the nineties and so even when adjusting for infl ation, the current cost of repaying a mortgage is always going to be higher than that faced by homebuyers historically. However, this is not the case when it comes
to the interest paid and in fact, the cost of servicing a mortgage is actually lower now than it was 30 years ago.
Favourable position While this is now starting to climb in line with an increase to the base rate, homebuyers remain in a very favourable position and although we cannot reduce the overall cost of buying. There is no doubt the mortgage
sector has helped thousands to overcome it at a far more aff ordable cost in recent years. CCR
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