With the Bank of England making the decision to raise interest rates by a further 0.5% - the largest jump since 1995 and the sixth consecutive increase since December of last year - the majority of homeowners will likely see their mortgage costs rise. But how does the cost paid by the average UK homeowner compare to those at the very top of the property ladder?
Based on the current UK average house price of £283,496, a 25% deposit (££70,874) and a three-year fixed mortgage, at a rate of 2.97%, the research by mortgage broker, Henry Dannell shows that the average UK homeowner requires an income of £47,249 in order to secure a mortgage based on a 4.5-time income multiple.
Once they have, they will pay £1,005 per month to repay their mortgage, with the total cost of their loan hitting £301,489 over the lifetime of the mortgage, equating to £88,867 paid in interest.
In London as a whole, the required income to secure a mortgage climbs to £87,697 on the current London house price of £526,183 - once a deposit of £131,546 has been placed. Over the lifetime of the mortgage, this will equate to a total loan payment of £559,578, with interest alone hitting £164,941.
However, in the prime London market, a £5m property purchase would require a 25% deposit to the tune of £1.25m. Once this has been placed, the average income required to secure a mortgage is still £833,333 per year.
How about the monthly cost of repaying a mortgage on a £5m home? £17,724 per month, with a total of over £5.3m paid over 25 years, £1.6m of that coming in interest alone.
Geoff Garrett, Director of Henry Dannell, commented: “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.
"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.”