The price of buying a prime property ‘eye-watering’, says mortgage broker

Most of us can only dream of buying a prime home, and new research by a mortgage broker has reinforced this by revealing the true cost of securing a property purchase at the very top tier of the market in the UK.

With a monthly repayment of nearly £18,000, Henry Dannell says it’s eye-watering, to say the least.

The Bank of England last week the decision to increase interest rates by 0.5%, the largest jump since 1995 and the sixth consecutive increase since December of last year. 

For the majority of homeowners, this means monthly repayments are likely to increase further. But Henry Dannell has now compared the cost paid by the average UK homeowners with those at the very top of the ladder.  

Based on the current average house price in the UK of £283,496, a 25% deposit (£70,874) and a three-year fixed mortgage, at a rate of 2.97%, the research reveals that the average UK homeowner requires an income of £47,249 to secure a mortgage based on a 4.5-time income multiple. 

Once this mortgage has been secured, the average homeowner will pay £1,005 per month to repay their mortgage. The overall cost of their loan will hit more than £300,000 over the lifetime of the mortgage, equating to £88,867 paid in interest.

In the capital, the required income to gain a mortgage rises to £87,697 against the current London house price of £526,183. The average deposit itself reaches a huge £131,546. Over the lifetime of the mortgage, this will equate to a total loan payment of £559,578, with interest alone hitting £164,941. 

In the prime London market, a £5 million property acquisition would require a 25% deposit to the tune of £1.25 million. Even once this has been placed, the average income required to secure a mortgage is still £833,333 per year.

The monthly cost of repayment a mortgage on a £5 million home is £17,724 per month, with a total of more than £5.3 million paid over 25 years, £1.6 million of that coming in interest alone. 

“It’s fair to say that we’ve enjoyed one of the most sustained periods of affordability in living memory with regard to borrowing, but a sixth consecutive base rate hike will continue to dampen our ability to borrow for a relatively low cost,” Geoff Garrett, director of Henry Dannell, said.

“This means the cost of borrowing in order to buy will start to climb, regardless of whether you’re doing so at the average UK price threshold, or at £5m and above.” 

“Of course, for those already paying almost £18,000 per month to repay their mortgage, any increase is going to be far more notable in a pounds and pence sense.”