6% mortgage rates are equivalent to 25% in 1980, lender claims

Leeds Building Society has pledged to honour any mortgage offers and support borrowers during this period of market uncertainty.

It comes as analysis by the lender suggests housing is now at its least affordable since records began.

The average pricing on a two-year fixed rate have hit 6.43% and the building society highlights that while this may be lower than the 15% borrowers paid in the 1980s, higher property values and debt makes the current environment more tough.

In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3% of disposable income. 
Today, those figures are around £292,000 and 45.1% respectively.

Its research suggests the 6.43% mortgage rates of today are equivalent to a rate of 25.7% in 1980.

The Society has confirmed it will honour any mortgage offers - including the offered rate - to new customers for six months from the date of issue, aside from in limited circumstances such as fraud, misrepresentation or non-disclosure of material information.

All existing customers who are up to date with their mortgage repayments and who are within three months of the end of their fixed rate deal will be given a choice of other mortgages that they can transfer to.

It will also not charge any arrears fees if borrowers fall behind on their mortgage repayments until at least 1 April 2023 - extending its suspension of these fees since the start of the COVID-19 pandemic.

The lender also said it will provide tailored support to all members who are struggling, or may struggle, with repayments or are in arrears.

Richard Fearon, chief executive of Leeds Building Society, said: “We stand firmly on the side of homeowners and first-time buyers and will do everything we can as a lender to help them. 

“The recent, rapid interest rate rises following the mini-budget have been a hammer blow to borrowers and will continue to cause distress for them over the coming months."

He said there is an urgent short-term need to restore market confidence but said ae longer-term aim of this Government should be to address the drastic shortage in housing. 

Fearon added: “Borrowers now face the toxic combination of higher interest rates and a lack of suitable and affordable homes. With enough political will a decades-old problem can be overcome, which would start to deliver on the homeownership aspirations of millions of people.”