Homeowners’ mortgage interest payments could cost £412 more in 2023

After the Budget from Chancellor Rishi Sunak was revealed, homeowners have been warned to prepare for what may be the biggest spike in interest payments since the financial crisis.

The government’s independent forecaster, the Office for Budget Responsibility (OBR), has said that if inflation rises by more than 5%, which is possible, then a higher bank rate and more expensive mortgages are likely to happen in 2023.

To help highlight the worst-case scenario for aspiring homeowners, personal finance experts have uncovered the full figures – before sharing their top tips for overcoming this potential rise.

Homeowners’ Mortgages Could Cost £413 More in 2023

These figures were created using Nationwide’s mortgage calculator, and delve into what it could mean for homeowners with different mortgages. The figures are, however, based on a mortgage value of £200,000 and a mortgage length of 25 years.

Worst-Case Scenario: If Mortgage Base Rates Increased by 3.5% in 2023
Current mortgage rate	Monthly payment on a £200,000 mortgage	Predicted ‘worst-case scenario’ rate (+3.5%) in 2023	Predicted 2023 monthly payment on a £200,000 mortgage
0.9%	£745	4.4%	£1,001 (extra £256 per month)
1.5%	£800	5.0%	£1,170 (extra £370 per month)
2.5%	£898	6.0%	£1,289 (extra £391 per month)
3.5%	£1,001	7.0%	£1,414 (extra £413 per month)

As you can see, a mortgage of £200,000 on the cheapest rate (0.9%) currently costs, on average, £745 per month. However, in the worst-case scenario, should the base rate rise to 3.5% in 2023, this would cost aspiring homeowners £1,001 per month, instead. That’s an extra £256 to pay monthly.

Those on the other end of the scale could see their current monthly payment of £1,001 per month increase to a possible £1,414 per month if interest rates were to rise by 3.5%.

A Guide to Understanding Mortgage Fees and Charges

To help aspiring homeowners gain a better grasp of mortgage payments, Ocean Finance have listed the other expected fees (before your mortgage is approved), as well as the average cost for each:

Fee	More Information	Average Cost
Booking fee	When you first apply for a mortgage, you pay a booking fee.	Whilst this can vary lender-to-lender, it’s typical to cost around £99 to £250 and is non-refundable.
Arrangement fee	Also known as product fees or completion fees, these are payable to your lender for setting up your mortgage. Some lenders will let you add the fee to your mortgage balance but remember that this will cost you more in interest and increase your monthly repayments.	According to Money Helper, these can cost anything from £0 to around £2,000.
Valuation fee	Your mortgage provider will send someone out to do a basic survey of the property, to check that they aren’t lending you more money than it’s worth. Unfortunately, if the mortgage falls through after a valuation, you’re unlikely to get a refund for this fee.	Whilst some lenders offer it for free as an incentive, it’s normally around £250 to £1,500 depending on how much the property is worth.
Clearing House Automated Payment System (CHAPS) fees	This is a non-refundable fee for transferring your mortgage funds to your solicitor upon completion	This costs around £25.
Own building insurance fees	Legally, you need to take out building insurance when you buy a house.	If you get an insurance policy through a different company, your mortgage provider may charge you a fee of around £25 to check if it includes sufficient cover. But some lenders will do it for free.
Mortgage account fees	This pays for the lender’s admin costs associated with setting up, running, and closing your mortgage.	This costs around £100 – £300.
Legal fees	These are payable to your solicitor for completing your legal paperwork. You usually have to pay a small amount upfront and then pay the rest upon completion. If the sale falls through, you could lose the funds you’ve paid up to that point.	Some lenders pay all or part of your legal fees as an incentive. You can shop around for a good deal elsewhere, but your lender must give them their seal of approval.
Mortgage advice fees	These are only payable if you’ve hired a broker or financial adviser.	The amount will vary depending on which adviser you choose, but some charge a commission from lenders and others charge a fixed fee upfront of about £500.
TOTAL ADDITIONAL COSTS		Approximately £2,224 to £4,600