To coincide with the result of the EU referendum on this day in 2016, research from L&C Mortgages shows the significant shift in interest rates in the intervening ten years, underlining the significant change that mortgage borrowers have faced.
Tracking the lowest rates from the top ten UK lenders shows the average two-year remortgage rates for those with a 40% deposit have trebled since the referendum.
On this day in 2016 the average rate was just 1.52% but has now lifted to 4.61%. Average five-year rates are now 4.66%, having more than doubled from 2.20% in 2016.
A £200,000 25-year repayment mortgage would cost £322 more per month, a rise of almost £3,870 more each year.
Homebuyers have seen similar hikes. The average two-year purchase rate for those with a 10% deposit was just 2.48% in June 2016 but now clocks in at 4.93%. Five year rates have lifted to 4.84% from 3.29% in ten years.
Mortgage rates have risen significantly in recent years with a host of factors contributing to the shift. Borrowers have also experienced the effects of the pandemic, the consequent rise in inflation and periods of market volatility, which increased funding costs for lenders, such as the Mini Budget and conflict in Ukraine and West Asia.
David Hollingworth, associate director at L&C Mortgages, said: “The rate environment has shifted dramatically since the referendum and borrowers have had to adapt to a radical change in mortgage costs. Base rate sits at 3.75% today compared to just 0.50% at the time of the vote to leave the EU and then dipping further to 0.25% in the following months.
“A lot has happened in the mortgage market over the last ten years but a generation of borrowers that was used to rock bottom interest rates have had to recalibrate. Ultra-low rates became the norm over a prolonged period, so the rapid uplift has made life difficult for homeowners.
“First-time buyers and homemovers are now navigating a market where rates of close to 5% or more have become typical, which may not dull the desire to buy but does transform how people think about their mortgage choices.
“What does echo 2016 is that political uncertainty persists. The vote to leave resulted in a change of Prime Minister and borrowers today are again wondering what another change at the top will mean for them, following Keir Starmer’s resignation.
“Markets don’t like uncertainty, so borrowers may face more volatility to come. What is clear is that reviewing the mortgage and taking as much control as possible will improve the chance of getting the best possible value for your mortgage.”
