Are UK mortgage costs set to rise in 2022?

Mortgages could be on their way to being as unaffordable today as they were during the great recession of 2008. This may mean further financial pressure to homeowners who are struggling with the cost of living crisis.

Earnings spent on mortgage repayments are currently 5% higher than in 2019 and 3.1% higher than in 2011. The current percentage is not far off the 34.3% recorded in 2008.

What does the research say?

Specialist property lending experts, Octane Capital, took the average UK house price of £276,019, with a 75% loan-to-value mortgage of £207,014 and then applied an average interest rate for a three-year fixed rate mortgage of 1.84% over a 25-year term. The average monthly mortgage repayment comes out at £859.41.

The average annual gross salary in the UK is £31,447, or £2,621 a month. As such, today’s average mortgage repayment equates to 32.8% of monthly income.

Are mortgage interest rates set to increase further?

The Bank of England base rate is currently 1.75%. The base rate was increased from 1% to 1.25% on 16 June 2022 and then to 1.75% on 4th August 2022 to try and control inflation. With further rises expected, mortgage borrowing could become increasingly expensive over the next year.

Will house prices drop in 2022?

There is increased speculation that the housing market could crash in 2022 due to higher interest rates and increased cost of living as households try to afford rising energy and fuel costs.

The Bank of England has predicted that inflation in the UK will hit 10% by the end of 2022.

Rightmove has projected house price growth to drop from its current level of 9.7% to 5% by the end of 2022.

However, house prices have risen consistently, making it the longest steady price increase for six years.

Low mortgage rates are still driving the market, but there is concern that soaring inflation will increase mortgage rates and likely put some buyers off.

We’re here to help

In a fast-changing environment, it’s more important than ever to have someone on your side.

While the current cost of borrowing may still remain fairly favourable, it’s vital you consider what any further increases may mean for your financial stability, as those borrowing right up to their limits initially are sure to struggle further down the line.

We can help you secure the best mortgage for your needs and help reduce risk by exploring solutions that allow for future changes, with healthy margins that give you some level of breathing room, should costs increase.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.


  • Octane Capital
  • Bank of England
  • Rightmove
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