Mortgage rates trebled since Brexit vote as borrowers face fresh political uncertainty
Mortgage rates have been influenced by a range of factors over the past decade, including the pandemic, rising inflation and periods of market volatility.
Mortgage rates have trebled over the decade since the Brexit vote to leave the EU, with borrowers now paying almost £3,900 more a year on a typical £200,000 mortgage than they would have done at the time of the referendum, according to research from L&C Mortgages.
The mortgage broker analysed the lowest rates from the UK’s 10 largest lenders and found that the average 2-year fixed remortgage rate for borrowers with a 40% deposit has risen from 1.52% on 24th June 2016 to 4.61% today.
Average 5-year fixed remortgage rates have also more than doubled over the same period, increasing from 2.20% to 4.66%.
For a borrower with a £200,000 repayment mortgage over 25 years, the increase equates to an additional £322 per month, or almost £3,870 a year.
Homebuyers have also seen borrowing costs rise significantly.
The average 2-year fixed purchase rate for borrowers with a 10% deposit has increased from 2.48% in June 2016 to 4.93%, while average 5-year fixed purchase rates have risen from 3.29% to 4.84%.
The findings came exactly 10 years after the Brexit referendum and at a time of renewed political uncertainty, with borrowers facing another change of Prime Minister following the resignation of Sir Keir Starmer.
L&C said mortgage rates have been influenced by a range of factors over the past decade, including the pandemic, rising inflation and periods of market volatility that have increased funding costs for lenders.
Events including the mini-Budget and conflicts in Ukraine and the Middle East have also contributed to higher borrowing costs.
The Bank of England base rate currently stands at 3.75%, compared with 0.50% at the time of the referendum.
It subsequently fell to 0.25% in the months after the vote.
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.”
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