Buyers forced to find an extra £18,200 just to keep monthly mortgage bills down as rates jump to 4.8%

BUYERS looking to move home this year need to find an extra £18,200 just to keep their monthly mortgage payments the same as they were in January, new figures reveal. The huge sum is needed to offset a jump in mortgage rates, which have climbed from below 4% at the start of the year to around 4.8% now. Rates have risen sharply after the outbreak of conflict in the Middle East pushed up global energy prices, driving inflation higher than expected and forcing borrowing costs up. The Bank of England has kept interest rates on hold at 3.75% this year, despite hopes they would fall as inflation cooled. Sign up for the First Time Buyer Guide newsletter Thank you! But fixed mortgage rates have still climbed because lenders base them on market expectations of future rates rather than the base rate alone, and traders now expect the Bank to hold rates higher for longer to combat inflation. According to property website Zoopla, the rise in mortgage rates has slashed the average buyer’s borrowing power by 9%. It means someone who could previously afford a £200,000 mortgage while keeping their monthly bill the same can now only borrow around £182,000. To make up the shortfall and still afford the home they want, buyers must either stump up a bigger deposit, accept higher monthly repayments, or look for a cheaper property. For those in London, the extra deposit needed is almost double the national average, at £35,500, reflecting the capital’s higher house prices. Buyers in the North East have been hit hardest in percentage terms but face a smaller cash gap, needing to find an extra £10,200. Most read in Money The figures come despite clear signs that an “autumn bounce” is now under way in the property market after a slow summer. Searches for homes on Zoopla are up 7% year-on-year, marking the first time in a year that demand has risen across every region of Britain. The South East and East of England have seen the biggest jumps in interest, with searches up 8.9% and 8.5% respectively. However, actual sales agreed are still down 6% compared with last year, as many buyers continue to sit on the fence over affordability concerns. The gap between this year’s sales figures and last year’s is starting to narrow, though, as confidence slowly returns. House hunters do have more choice, with the total number of homes on the market 5% higher than a year ago. This is helping keep prices in check, as sellers compete for a smaller pool of ready and willing buyers. Average UK house price growth has slowed to 0.9% year-on-year in July, down from 1.3% in June. Prices are falling in London, the South East and South West, but continue to rise strongly in the North West, Yorkshire and Northern Ireland. Richard Donnell, executive director at Zoopla, said: “Many buyers have taken a ‘wait and see’ approach over the summer months in response to higher borrowing costs and political uncertainty. “The low point for activity was mid July around the time of the World Cup final. “Since then we have seen a steady increase in the number of people searching for a home, assessing their options ahead of the post holiday rebound in sales market activity. “This is a nationwide trend and the first time searches for homes are up across Britain this year.” He added: “Average mortgage rates have stabilised but remain closer to 5% than 4% meaning affordability remains an important factor for many home buyers choosing their next home. “Buyers have plenty of choice this autumn and will be able to make competitive bids for homes. “Motivated sellers need to price carefully to attract interest and bids and seek the advice of local agents for the likely levels of demand and interest in their home as market conditions vary widely across the country.” Comment now