ONS calculator: Runaway mortgage costs create remortgage nightmare

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the ONS mortgage payment calculator, showing runaway mortgage costs create remortgage nightmare.

Someone with a 25-year mortgage, fixed for five years, and a £30,000 deposit would pay:
    • £2,920 a month for a semi-detached house in Buckinghamshire. You’d need a deposit of £150,000 to bring monthly payments below £2,000.
    • £3,196 for a detached house in Stockport. You’d need to opt for semi-detached to bring monthly payments below £2,000.
    • £3,284 a month for a flat in Wandsworth. Even with a deposit of £200,000, mortgage repayments are more than £2,000 a month
    • £3,382 for a terraced house in Cambridge. You’d have to trade down to a flat to bring the monthly payments below £2,000

 

    • A separate study from the HL Savings & Resilience Barometer found that remortgaging will swallow an extra 3.1% of your income – the equivalent of an 80% rise in energy bills.
    • It means 2 million people are at risk of going into arrears – 650,000 of whom don’t have enough emergency savings to protect themselves from these rising costs.
Sarah Coles says:

“This lays bare the shocking cost of a new mortgage around the country.

“For new buyers armed with a reasonable deposit, the options are increasingly limited.

“Unless you can find some extra cash up-front, you may well end up having to scale back your ambitions.

“For remortgagers with a decent chunk of equity in the property, the additional costs may be manageable, but those with large loans and little equity have worryingly few options.

“The HL Savings & Resilience Barometer found that remortgaging this year will typically eat an extra 3.1% of your income.

“It will mean 2 million people will be spending more than quarter of their household income after tax on the mortgage. At this stage it puts them at risk of falling into arrears.

“Some of these people have enough emergency savings to fall back on, but 650,000 of them don’t – which puts them at ‘high risk’ of arrears.

“Others not only don’t have enough savings, but are already spending more than they earn each month, putting them at ‘critical risk’ – 347,000 people are in this boat.

“For anyone in this position, there’s the risk that faced with the cost of a remortgage, they can no longer afford to stay in their home.”

 

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay