2 million mortgage borrowers face payment hikes of over £1,000 per year

3 May, 2022

With the Bank of England’s interest rate continuing to rise, Moneycomms research commissioned by TotallyMoney looks at the impact of an increase to 1% above its 2021 level of 0.1% on mortgage payments, using house price figures from HM Land Registry.

With the UK’s median loan-to-value (LTV) ratio at 73.46, the research is broken down by LTVs of 60%, 75%, 90% and by region, based on a 1% rate increase on a 25 year mortgage term. The full table, including breakdowns, can be found here:

https://www.totallymoney.com/interest-rate-rise-mortgages.pdf.

The average UK property costing £270,708 will see an annual increase in mortgage repayments of £1,188 on a 75% LTV mortgage with a 1% interest rate rise. This increases to £1,440 for those with a 90% LTV ratio and is £948 for a 60% LTV mortgage.

Unsurprisingly, Londoners would see the biggest increases to their mortgage repayments. With a 1% base rate increase, the average home costing £519,934 would see annual mortgage payments increase by £1,824, £2,292, £2,760 on respective 60%, 75%, and 90% LTV mortgages.

With 850,000 properties on tracker mortgages and 1.1 million on Standard Variable Rates, 1 in 4 UK households are already exposed to changes in the Bank of England’s base rate. Additionally, people looking to secure new deals will find that while the number of options are reducing, those still available are getting more expensive.

This comes as separate research from TotallyMoney and PwC shows that 8.9m adults exhibit signs of financial fragility¶. A group who has already had their income negatively impacted by the pandemic or to struggle to make repayments on their borrowing in the next year.

Alastair Douglas, CEO of TotallyMoney comments:

“As the Bank of England increases the base rate to ease inflationary pressures, the 2 million homes on variable-rate and tracker mortgages will see their household finances squeezed even more.

“And the situation isn’t going to get much better for those nearing the end of their current deals. They have a choice of facing the more expensive SVR or having to switch to a new, and more expensive fixed-rate product.

“Customers feeling the squeeze from the increased cost of living should consider cutting back on using expensive credit lines such as overdrafts, and move interest-bearing credit card balances to a 0% offer. By reducing the interest being paid, customers can repay their debts quicker, or use the money saved to cover other costs.

“At TotallyMoney we’re on a mission to help everyone move their finances forward. One way we’re doing this is by putting customers in control of their own financial data so that they can move towards a better financial future.”