Bank of England raises Interest Rates
We will all be aware of recent interest rate increases from the Bank of England. However, what many people will not have noticed is the fact that the average annual cost of mortgage repayments has increased over the last three years by as much as a third.
This is the combined effect of both increasing interest rates as well as larger and larger mortgages. The average annual cost of a mortgage in the UK in 2003 was £4,711. According the one survey, this figure has not increased to £6,284. The survey also shows that over a million homeowners now pay more than £1,000 a month on their mortgage, with the majority of them living in London.
Mortgage rates are on the rise with rates raising from an average of 4.29 percent in 2003, to 5.41 percent today. These figures come from a YouGov poll of over two thousand mortgage payers. However, as interest rates have risen, house prices have been rising even faster and this has meant that borrowers are being forced to take on larger and larger loans as they seek to secure the homes they want.
Some debt charities have also drawn a lot of attention to the increases that banks and mortgage providers are charging for arranging mortgages and exiting them. These fees have been increasing steadily as mortgages get larger and are simply adding to the overall cost of borrowing. Many borrowers are now also having to depart from traditional mortgages of 90% and four times earnings, and are borrowing 100% or more, and ever higher income multiples. Without even taking account of the difficulties that some borrowers will face in repaying these larger mortgages, banks are adding even more charges such as higher lending fees which simply put borrowers in even more debt.