Mortgage crisis: how much more you will pay as rates remain high

Interest rates may finally have peaked, as the Bank of England chose to hold the Bank Rate at 5.25pc following its most recent Monetary Policy Committee meeting. This is far lower than gloomier outlooks seen earlier this ear, which predicted the Bank Rate to exceed 6pc.

Lenders are said to already be pricing this into their fixed-rate mortgage deals, with several big name banks recently announcing rate drops, and some of the most competitive deals dipping below 5pc – but borrowing is still expensive.

The average two-year fixed-rate mortgage is 6.36pc, while five year deals are averaging at 5.92pc, according to data analyst Moneyfacts.

The consumer price index (CPI) measure of inflation remained at 6.7pc in September. 

Core inflation, which strips out volatile measures like food and energy prices, is continuing to fall. September saw it drop to 6.1pc, down from 6.2pc the month before.

The Bank of England has increased the Bank Rate multiple times since December 2021 in a bid to bring inflation back down to its target 2pc. It’s announcement on 21 September was the first time in nearly two years it had chosen not to increase the rate, sticking at 5.25pc.

Use our calculator to work out how recent shocks to the mortgage market might impact your monthly payments. 

First-time buyer

A first-time buyer bought their £250,000 home with a 10pc deposit and 2.1pc mortgage two-year rate in October 2021.

With base rates rising, the new current average two-year fixed mortgage rate of 6.36pc would see their monthly payments increase by £535, hitting £1,500 in total payments a month.

Even if they earnt £45,000, a high salary compared to the national average, it would see more than half of their take home pay go to mortgage payments, compared with just over a third before the renewal. 

Mid-way through

Someone is renewing a mortgage on their semi-detached home which they bought a decade ago. They have 15 years left on their mortgage with £100,000 left to pay off. 

Their current rate, 1.59pc, is ending; using the current average, they would see their monthly payments jump from £625 on their current rate to £863.

Nearing the end

This person bought their detached home over two decades ago and has just two years left on their mortgage, with £7,000 left to pay.

They’ve been on a 1.59pc mortgage rate for the past two years, paying £297 a month.

Because they bought their house when prices were cheap and their remaining mortgage is low, their payments will increase from £297 to £311 a month if they remortgage at the current market average.

This article is kept updated with the latest information.