Why are homebuyers paying more despite recent Bank of England rate reductions?
The average monthly mortgage payments have risen by 8.1% year-on-year, despite interest rate reductions in late 2024, new research from mortgage adviser Alexander Hall has revealed.
The analysis examined the costs for homebuyers in the current market, based on a 25-year mortgage term and an 80% loan-to-value ratio (LYV) on the average property price. The findings highlight how affordability challenges have grown compared to the same period last year.
According to the data, the average mortgage interest rate has increased slightly to 4.3%, up from 4.03% in January 2024. Meanwhile, the average property price has risen by 5.1% year-on-year, reaching £292,059.
For a buyer purchasing at this price point, an 80% LTV mortgage would require a loan of £233,657, with a 20% deposit of £58,412. The combined increase in home prices and mortgage rates has driven monthly mortgage repayments up to £1,272 — £95 more per month than in January 2024. Over a year, this adds £1,142 to the total cost of owning a home for new buyers compared to the previous year.
Stephanie Daley (pictured), director of partnerships at Alexander Hall, noted that the mortgage market has stabilised over the past year, but warned that costs remain a key concern for buyers.
“A greater degree of stability returned to the property market in 2024, and we certainly saw a settling of the landscape with respect to the mortgage market,” Daley said. “However, despite two reductions to the base rate, we haven’t seen mortgage rates follow suit and, in fact, the monthly cost of a mortgage today sits higher than it did this time last year.”
She added that many buyers are now rushing to complete purchases before the April 1 stamp duty deadline, which could further impact demand.
“It’s always best to seek the advice of an expert mortgage adviser when looking to buy in any market conditions, as this will ensure you secure the very best mortgage available to you based on your financial position within the market,” Daley advised.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
