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Average Mortgage Payment UK

HomeMortgage DebtAverage Mortgage Payment UK

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

Every property is different, and so are the finances for each family. However, if you are familiar with some of the average costs and interest rates associated with mortgages, you will at least have a starting point. Using information from GOV.UK and ONS, I’ve put together everything you need to know about the average mortgage payment in the UK.

First, let’s look at some of the statistics around average mortgage payments.

Average Mortgage Payment UK Statistics

  • The average spent on mortgage payments is around £733 a month.
  • Monthly mortgage costs have increased 31% in the last ten years.
  • The average first-time buyer deposit is £58,986 – increasing by £11,677 since March 2020.
  • Between January and March 2021, the number of mortgages with arrears of more than 2.5% of the remaining balance increased by 15 each day.
  • At the conclusion of the first quarter of 2021, there were £1.56 trillion in outstanding home mortgage loans, a 3.6% increase from the previous quarter.
  • New mortgage obligations are £77.5 billion, up 15% from last year.
  • Mortgage arrears dropped to their lowest level since 2007 at only 0.94% in Q3 2019.
  • Gross mortgage advances totalled £83.3 billion in Q1 2021, a 26.5% increase from Q1 2020 and the highest amount since Q4 2007.
  • The rate for a 10-year mortgage in April 2021 was 2.58%.
  • Compared to March 2020, when it was 2.36%, this is a slight increase.
  • In March 2021, the average home price in the UK peaked at £256,000.
  • From July 2018 to June 2019, there were 469,000 remortgages on homes.
  • Out of these mortgages, 231,000 were remortgages with equity taken out and 238,000 were remortgages for refinancing.
  • In the UK, 39,000 homeowners remortgage their homes per month on average.
  • In Q1 2019, remortgages accounted for more than a third (38.9%) of residential loans.
average mortgage interest rates over time

How interest affects your mortgage payments

If you’re like most people, you view your monthly mortgage payments as a way of paying for your house. However, a significant portion of the funds really goes toward paying interest.

The rate for a 10-year mortgage in April 2021 was 2.58%.

This is due to two factors.

First, because mortgages are for huge sums of money, they come with high-interest rates, especially at first. Larger amounts of money incur more interest fees than smaller amounts at the same interest percentage rate.

The average first-time buyer deposit is £58,986 – increasing by £11,677 since March 2020.

Secondly, since mortgages have a long lifespan, the interest has a lot of time to rise. The importance of the interest rate and the potential benefits of a shorter mortgage is due to this. However, regardless of the rate you secure, a significant portion of your earnings will be used to pay mortgage interest.

housing costs for mortgage holders

The average length of a mortgage

Typically, it takes 25, 30, or 35 years to pay off a mortgage. 25 years have traditionally been the most popular term, but 30 and even 35-year mortgages are starting to gain ground. Because mortgages are the most expensive loans you can get, they are also the longest.

In March 2021, the average home price in the UK peaked at £256,000.

Longer mortgages are appealing because monthly mortgage payments are reduced. As a result, it is easier for people to qualify for a mortgage, enabling them to move up the property ladder. But this means they will pay significantly more over the course of a lengthier mortgage.

Average UK Housing Cost

The average household in the UK spends £7,000 per year on utilities, communications, and television services, as well as other costs associated with running and maintaining the home, such as insurance and council tax. On top of that, many people have to pay their mortgages. The average monthly mortgage payment is about £733.

The average spent on mortgage payments is around £733 a month.

Comparing the Average Mortgage Cost Including Interest

It can be intimidating to calculate a mortgage’s total cost over its whole duration, but it is crucial to enter any long-term financial choice with as much knowledge as possible.

We can get a ballpark estimate of the total repayments based on the average house price in the UK, which is £285,113, and the average mortgage interest rates, depending on the term length and available deposit.

It is simple to understand how altering the mortgage’s duration, finding a lower interest rate, or raising your down payment could have a significant impact on the overall payback amount including monthly expenses.

New mortgage obligations are £77.5 billion, up 15% from last year.

As an illustration, if someone took out a mortgage for the same amount of £270,857 at 2.97% interest with a 5% deposit over 25 years, extending the term by 5 years to 30 years will raise the overall repayment by £25,460 (6.6%), but lower the monthly payment by £142. (11%).
Saving even a small amount of money on interest can make a huge impact on the debt and the time it takes to pay off the mortgage. The choice of the right lender may also be significantly influenced by factors like poor credit.

mortgage costs plus interest rates

Conclusion

The amount of money you have to pay back each month on your mortgage can vary greatly depending on your personal situation, the amount of money you need to borrow, and the region in which you live. 

Mortgage guarantee schemes and other options can help candidates who might not otherwise have been accepted. Working with a specialised private broker can greatly improve the chances of getting accepted.

Every homebuyer needs to be aware of the total cost of their mortgage, including both monthly payments and the total cost of the mortgage over the duration of the mortgage.

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