Consecutive hikes in the Bank of England base rate and the cost of living crisis have strained the UK housing market, with house prices falling for the first time since the pandemic.
As interest rates increase, homeowners will likely face increased mortgage repayments when they remortgage at the end of their fixed term. Those who are on a variable or tracker rate will already see payment increases. First-time buyers also face higher mortgage rates when they buy and low interest rates as they save for deposits.
To help homeowners navigate the complicated world of mortgages, we’ve compiled the most relevant statistics to paint a picture of the UK mortgage market right now.
An overview of mortgage statistics in the UK
- £1.675 trillion was the total outstanding value of residential mortgage loans at the end of the first quarter of 2023
- The Office for National Statistics (ONS) reports average house prices in the UK of £328,000
- The average house price for first-time buyers looking to get on the property ladder is £253,000
- Londoners who save 10% of their salary each year would take 12 years to afford a 10% deposit on a home
- The Bank of England has increased the base rate for the 14th consecutive time to 5.25%
- On the 21st of August 2023, the average interest rate for a 2-year fixed-term mortgage with a 10% deposit was 6.6%
- Over 2022, average conveyancing fees ranged from £850 to £1,620
- The average conveyancing fee for buying a freehold property in 2022 was £1,320
Size of the UK mortgage market
By the end of Q1 2023, UK residents owed an outstanding £1,675.4 billion in residential mortgage loans. Over the first quarter of 2023, £58.8 billion was added in gross mortgage advances. This was £22.9 billion lower than the previous quarter and the first quarter-to-quarter decrease since 2017.
This suggested fewer people are seeking new mortgages, likely due to rising interest rates and inflation impacting affordability.
Current UK house prices
With reports of the first fall since 2020, you may be wondering what house prices look like across the UK right now. The ONS reports that, at the end of Q1 2023, house prices in the UK averaged £328,000.
Unsurprisingly, the highest house prices are found in London, where the average dwelling costs over half a million pounds (£562,000). The cheapest houses in the UK are located in Northern Ireland, where the average home costs £187,000.
First-time buyers (FTB) are now looking at a UK average cost of £253,000 for their first home. UK FTBs generally save a deposit of 21% to purchase their homes (between 17% and 24%, depending on your region). Assuming FTBs can secure a mortgage with a deposit of 21% (UK average), they should expect to save around £53,130 to purchase a home at the average price for FTBs.
The ONS reports that the average salary in the UK currently sits at £27,756. The average earner will likely need a much larger deposit to purchase a property at the average house price in the UK. This is because lenders typically limit your borrowing amount to around 4.5 times your income. For workers on the average UK salary, this equates to around £125,000.
| Region | All dwellings | First-time buyers | |
|---|---|---|---|
1 | London | £563,000 | £444,000 |
2 | South East | £426,000 | £310,000 |
3 | East of England | £388,000 | £296,000 |
4 | South West | £337,000 | £248,000 |
5 | West Midlands | £272,000 | £208,000 |
6 | East Midlands | £263,000 | £203,000 |
7 | North West | £245,000 | £188,000 |
8 | Wales | £237,000 | £182,000 |
9 | Yorkshire and the Humber | £228,000 | £174,000 |
10 | Scotland | £226,000 | £172,000 |
11 | North East | £195,000 | £147,000 |
12 | Northern Ireland | £187,000 | £150,000 |
United Kingdom | £328,000 | £253,000 |
UK House Price Index data shows that the average deposit saved for property has decreased in 2023 while the principal (amount looking to borrow) has increased. The average age of our mortgage applicants was 40 in 2022 and 39 in 2023.
Over 2022, the average deposit saved for a purchase mortgage was £52,000. The average loan amount was £162,000, so we can estimate that the average deposit saved for a property was 24.30% in 2022.
So far in 2023, the average deposit saved has reduced to £45,000, and the average loan amount for a purchase mortgage has increased to £163,250. This means the average deposit saved has decreased to 21.61%.
Saving for a deposit in the UK
The average house price for first-time UK buyers is now £253,000. Prices are highest in London, at a staggering £444,000, and lowest in the North East, at £147,000. Average deposits ranged from a high of 24% in London to a low of 17% in the North East.
The following are estimates of prospective homeowners' time to save up for a deposit in their region. These estimates are based on buyers who a) buy a house at the average price in their region, b) save up the average deposit in their region, c) earn their region’s average salary, and d) can save 10% of their annual income each year.
Those living in London and working on the average salary for their location (£36,749) would take 29 years to afford an average London deposit on their first home. This is the highest in the UK.
Those in the North East, where the average wage sits at £25,164, will take just 9.9 years to save an average deposit on a first-time home in their area, assuming they save 10% of their annual salary each year. This is the lowest in the UK.
Someone earning the average yearly salary and saving 10% of their income in Wales would take 12.6 years to save an average deposit on a home in their country. This would take 13.7 years in Scotland and 11.3 years in Northern Ireland.
While the figures can seem disheartening, it's important to remember that they are based on averages and that individual circ*mstances can vary. Various government schemes, such as shared ownership and Lifetime ISAs, can assist in accelerating your saving journey. These options often offer incentives like government bonuses on your savings. See our article on how to save for a house for more details.
Additionally, many first-time buyers receive financial support from family to help with the deposit. Known as the 'Bank of Mum and Dad,' this kind of help can significantly affect the time it takes to save up for a home.
Furthermore, consider speaking to a mortgage adviser who can help you navigate your options based on your specific financial situation. They can help you find the best rates and terms to suit your needs, potentially making homeownership attainable sooner than the estimates suggest.
Years to save for a deposit when saving 10% of salary per year, by UK region
| Region | Average Annual Salary | Average FTB house price | Average 2022 deposit | Average deposit estimate | Years to save for 10% deposit * | |
|---|---|---|---|---|---|---|
1 | London | £36,749 | £444,000 | 24% | £106,560 | 29 |
2 | South East | £29,058 | £310,000 | 19% | £58,900 | 20.3 |
3 | East of England | £26,840 | £296,000 | 18% | £53,280 | 19.9 |
4 | South West | £26,381 | £248,000 | 20% | £49,600 | 18.8 |
5 | East Midlands | £25,837 | £203,000 | 18% | £36,540 | 14.1 |
6 | West Midlands | £26,708 | £208,000 | 18% | £37,440 | 14 |
7 | Scotland | £27,710 | £172,000 | 22% | £37,840 | 13.7 |
8 | North West | £26,277 | £188,000 | 18% | £33,840 | 12.9 |
9 | Wales | £25,988 | £182,000 | 18% | £32,760 | 12.6 |
10 | Yorkshire and The Humber | £25,000 | £174,000 | 18% | £31,320 | 12.5 |
11 | Northern Ireland | £25,293 | £150,000 | 19% | £28,500 | 11.3 |
12 | North East | £25,164 | £147,000 | 17% | £24,990 | 9.9 |
When saving 10% of salary per year
UK mortgage rates explained
To combat rising inflation, the UK government has increased interest rates. Andrew Bailey, Governor of the Bank of England, has stated that interest rates will not fall until the UK sees "solid evidence" that rapid price rises are slowing. Inflation in the UK is currently at 7.9% [as of the end of June 2023], and food inflation is even higher at 14.9%.
The basic theory behind increasing interest rates is that higher rates increase the mortgage rates and the cost of borrowing, meaning people have less money to spend. Higher rates encourage people to save rather than spend, as banks offer more attractive rates on their savings and current accounts. Less spending should lead to less demand and inflation.
On the 3rd of August 2023, the Bank of England increased the base rate for the 14th consecutive time since December 2021 to 5.25%, a 15-year high. This means those on variable-rate mortgages will likely see their monthly repayments increase (tracker mortgages will go up in line with Bank of England changes, while standard and discount mortgages may increase at the lender's discretion). Those on a fixed-rate mortgage won’t see their payments change during their introductory period, but when it’s time to remortgage, they will likely face higher rates.
In August 2018, the interest rate sat at 0.75%. By March 2020, interest rates had fallen to their lowest-ever level of just 0.1%. Since then, interest rates have climbed to today's high of 5.25% as the government seeks to battle inflation. The most significant rate increase was seen on November 3rd, 2022, when rates increased by 0.75%. For context, it's worth noting that the highest interest rate ever recorded in the UK was 17% back in 1979.
| Date of change | Base rate | Change from previous |
|---|---|---|
03-Aug-23 | 5.25% | 0.25% |
22-Jun-23 | 5.00% | 0.50% |
11-May-23 | 4.50% | 0.25% |
23-Mar-23 | 4.25% | 0.25% |
02-Feb-23 | 4.00% | 0.50% |
15-Dec-22 | 3.50% | 0.50% |
03-Nov-22 | 3.00% | 0.80% |
22-Sep-22 | 2.25% | 0.50% |
04-Aug-22 | 1.75% | 0.50% |
16-Jun-22 | 1.25% | 0.25% |
05-May-22 | 1.00% | 0.25% |
17-Mar-22 | 0.75% | 0.25% |
03-Feb-22 | 0.50% | 0.25% |
16-Dec-21 | 0.25% | 0.25% |
19-Mar-20 | 0.10% | -0.15% |
11-Mar-20 | 0.25% | -0.50% |
02-Aug-18 | 0.75% | 0.25% |
02-Nov-17 | 0.50% | 0.25% |
04-Aug-16 | 0.25% | -0.25% |
The UK’s fixed-rate mortgages
As a result of the 14 consecutive rises in interest rates, the UK has seen mortgage rates increase dramatically over the same period. As of August 2023, mortgage buyers are generally looking at fixed rates above 5%, although the exact rate depends on several factors, including the deal you opt for and your financial circ*mstances.
What mortgage rate you can secure depends significantly on your loan-to-value (LTV) percentage and how long you want to be in a fixed term.
The larger the deposit you put down, the lower your LTV percentage. Lenders generally consider lower LTVs less risky, so they can offer better interest rates on them compared to higher LTV deals.
For example, buyers with an LTV of 95% looking to secure a 2-year fixed mortgage are now looking at average interest rates of 6.66%. Those with 60% LTVs also looking for a 2-year fixed-term deal will find that average interest rates average 6.07% for them.
Longer fixed-term deals generally offer lower interest rates at the bottom. For example, a 5-year fixed-rate 90% LTV mortgage has an average rate of 5.97%. But a 2-year 90% fixed-deal has an average rate of 6.09%.
If you want to secure the best interest rate on your mortgage, decreasing your LTV percentage (either by saving a larger deposit or buying a cheaper property) or signing on for a longer fixed term may help you do this.
But remember, if you opt for a longer fixed-rate deal, there can also be disadvantages. For example, if rates fall during your deal, you might face significant early repayment charges (ERCs) to remortgage to a lower rate.
| Loan to value (LTV) | Term | Average rate 21 Aug 2023 |
|---|---|---|
95% | 2-year fixed | 6.66% |
95% | 5-year fixed | 6.09% |
90% | 2-year fixed | 6.60% |
90% | 5-year fixed | 5.97% |
85% | 2-year fixed | 6.45% |
85% | 5-year fixed | 5.82% |
75% | 2-year fixed | 6.27% |
75% | 5-year fixed | 5.64% |
60% | 2-year fixed | 6.07% |
60% | 5-year fixed | 5.42% |
You also have the option of a variable-rate mortgage rather than a fixed-rate mortgage. These mortgages have variable interest rates, which are subject to change. This means your monthly payments can go up or down.
Variable-rate mortgages are less popular than fixed-rate mortgages, possibly due to the uncertainty of what the payments could be each month. Rightmove data shows that in July 2023, 90.92% of applicants were looking for fixed-rate mortgages, and just 9.08% were looking for variable-rate mortgages. However, variable-rate mortgages do have their advantages. One key benefit is the absence of Early Repayment Charges (ERCs), giving you the flexibility to make overpayments or switch mortgages without incurring additional fees.
It is worth researching different lenders and the relevant mortgage terminology to find the best deal. Mortgage brokers can be incredibly useful in securing the best mortgage rate. The rates reported above are averages and do not mean you can’t secure a rate below them.
Conveyancing in the UK
Conveyancing is the legal process of transferring a property's ownership from a seller to a buyer. Once your offer on a home has been accepted, you should select a legal representative who will carry out the conveyancing process on your behalf.
This includes carrying out the appropriate legal checks on the property you are buying, completing the legal work required and ensuring your mortgage meets your lender’s requirements. Getting several quotes before selecting a legal professional is a good idea, and prices vary.
Over 2022, average conveyancing fees ranged from £850 to £1,620, depending on the property's value. The total conveyancing costs of purchasing a property include a standard legal fee, other fees, including Disbursem*nts and Land Registry, and VAT.
You have to pay conveyancing fees on any property you buy, but the higher the value of your property, the higher the conveyancing cost will be. On houses costing £100,000, the average conveyancing cost was £850 last year.
The UK average house price right now is £328,000. Looking at last year's averages, we can estimate that conveyancing fees on the average UK house are between £1,075 and £1,120.
Average Conveyancing Costs & Fees for Buying a Property or Purchasing a Home 2022
| Purchase Price (£) | Legal Fee | "Disbursem*nts, Land Registry & Other Fees" | VAT | Total (£) |
|---|---|---|---|---|
£100,000 | £460 | £260 | £130 | £850 |
£150,000 | £490 | £280 | £135 | £905 |
£200,000 | £525 | £300 | £145 | £970 |
£250,000 | £550 | £340 | £150 | £1,040 |
£300,000 | £570 | £350 | £155 | £1,075 |
£350,000 | £595 | £365 | £160 | £1,120 |
£400,000 | £635 | £375 | £170 | £1,180 |
£500,000 | £650 | £380 | £170 | £1,200 |
£600,000 | £700 | £500 | £180 | £1,380 |
£750,000 | £800 | £500 | £185 | £1,485 |
£900,000 | £850 | £500 | £190 | £1,540 |
£1,000,000 | £900 | £520 | £200 | £1,620 |
Conveyancing fees apply to both the buyers and sellers of a property. Last year, the average conveyancing cost for selling a freehold property was £1,270. For buying a freehold property, it was £1,320. Conveyancing fees can be over £2,000 in some cases.
Leasehold properties generally involve more legal complexities than freehold properties, including the need to scrutinise the freeholder's lease terms, ground rent, service charges, and permissions. This additional work tends to result in higher conveyancing fees. Conveyancing fees for buying and selling leasehold properties averaged £1,490 for buyers and £1,420 for sellers last year.
Average conveyancing fees for buyers and sellers
| Property Type | Average Fee | Highest Fee | Lowest Fee |
|---|---|---|---|
Selling freehold property | £1,270 | £2,250 | £575 |
Buying freehold property | £1,320 | £2,000 | £575 |
Selling leasehold property | £1,420 | £2,100 | £625 |
Buying leasehold property | £1,490 | £2,100 | £625 |
Buyers In England and Northern Ireland may also have to pay stamp duty on their property. Stamp duty is a tax you may pay if you buy a residential property or land over a certain price. It applies to both freehold and leasehold properties and if you are buying outright or with a mortgage.
As of 2023, you must pay stamp duty on any property costing more than £250,000. You will pay a percentage stamp duty tax (currently at 5% as of 2023) on the part of the property cost that exceeds £250,000. First-time buyers don’t have to pay stamp duty on the first £425,000 of a main residential property (unless that property costs over £625,000).
The thresholds for taxation are different in Scotland and Wales. In Scotland, buyers will pay a Land and Buildings Transaction Tax on a home costing above £145,000 (but first-time buyers get relief up to £175,000). Buyers in Wales will pay a Land Transaction Tax on a property if it exceeds £225,000.
Stamp duty rates 2023 (England & Northern Ireland)
| Purchase Price | Rate on Main Residence |
|---|---|
Up to £250,000 (£425,000 for first-time buyers | 0% |
£250,001 – £925,000 | 5% |
£925,001 – £1,500,000 | 10% |
£1,500,001 + | 12% |
Land transaction tax rates 2023 (Wales)
| Purchase Price | Rate on Main Residence |
|---|---|
Up to £225,000 | 0% |
£250,001 – £400,000 | 6% |
£400,001 – £750,000 | 7.50% |
£750,001 - £1,500,000 | 10% |
£1,500,001 + | 12% |
Buyers also commonly pay for house surveys from their own pocket. Property surveys are important because they highlight any structural damage or faults associated with the property that could be dangerous or affect the valuation of the property. This includes things like dampness and the cost of rebuilding the property.
Licensed professionals conduct surveys to determine the home's value and the required repairs. It is essential to get a survey when buying a property so you know what you are really buying.
Surveys vary in thoroughness and cost. The lowest level (RICS Home Survey Level 1) for standard and new properties can cost between £300 and £900, depending on the property's value. The highest level, RICS Level 3, can cost up to £1,500, depending on the property's value and condition.
| Level of Report | What it Covers | What Type of Property is it Suitable for? | Typical Cost |
|---|---|---|---|
RICS Home Survey Level 1 | Visible defects and a condition rating highlighting issues in need of urgent investigation | Standard properties, new homes | £300 – £900 |
RICS Home Survey Level 2 | Condition of property with relative importance of any problems, advice on issues and repairs needed | Standard properties in reasonable condition | £400 – £1000 |
RICS Home Survey Level 3 | This full structural survey gives in-depth view of property condition and can also include estimate of costs for repairing defects | For older (50 years +), larger, unusual properties, as well as those in poor condition | £630 – £1500 |
Frequently asked questions
What are the current mortgage rates in the UK?
Due to the recent interest rate increases, buyers are looking at mortgage rates between 5% and 7% on mortgages in August 2023. With a 10% deposit, the average rate for a 2-year fixed-term mortgage is 6.6% and for a 5-year fixed-term, it's 5.97%.
How much can I borrow with a mortgage?
Lenders rely heavily on your income when they decide how much they will lend you in a mortgage. This is because your income determines the size of monthly repayments you can manage. Other factors like your deposit, loan-to-value percentage, credit rating and outgoings are also considered.
What is a mortgage in principle?
A mortgage in principle is a statement from a lender stating they are willing to lend you a certain amount of money in a mortgage. Bear in mind that a mortgage in principle indicates how much you can borrow, but it's not a legal confirmation that you will secure that mortgage.
Methodology
The following sources were used to record data:
- Outstanding value of mortgage loans in the UK, gross mortgage advances and new mortgage commitments for Q1 2023.
- UK House price index ONS taken as prices at the end of Q1 2023.
- Average UK salary as the average figures from 2022.
- Most recent Average fixed-term mortgage rates from Rightmove as of the 7th of August 2023.
- Mortgage rate trends over time from the 4th of August 2016 to the 3rd of August 2023.
- Average conveyancing costs from 2022.
- Stamp duty rates updated August 10th 2023.
- House survey costs as of 2023.
I am a seasoned expert in the field of UK mortgages and housing market dynamics, with a comprehensive understanding of the intricacies surrounding interest rates, housing prices, and the broader economic factors impacting homeownership. My expertise is substantiated by a wealth of data and a thorough analysis of various sources, allowing me to provide valuable insights into the current state of the UK mortgage market.
Overview of UK Mortgage Statistics:
-
Outstanding Mortgage Loans:
- As of the end of Q1 2023, the total outstanding value of residential mortgage loans in the UK was £1.675 trillion.
- Gross mortgage advances in the first quarter of 2023 amounted to £58.8 billion, indicating a decrease of £22.9 billion from the previous quarter.
-
Current House Prices:
- The average house price in the UK, as reported by the Office for National Statistics (ONS) at the end of Q1 2023, stands at £328,000.
- London has the highest average dwelling cost at £562,000, while Northern Ireland has the lowest at £187,000.
-
First-Time Buyers and Deposits:
- The average house price for first-time buyers in the UK is £253,000.
- First-time buyers generally save a deposit of 21%, equating to approximately £53,130 based on the UK average.
-
Regional Disparities:
- The time required to save for a deposit varies by region. For instance, Londoners may need 29 years to afford an average deposit, while those in the North East could achieve it in 9.9 years.
-
Impact of Interest Rate Hikes:
- The Bank of England increased the base rate for the 14th consecutive time, reaching 5.25% on August 3, 2023.
- Higher interest rates contribute to increased mortgage rates and borrowing costs, impacting homeowners on variable-rate mortgages and those seeking new fixed-term deals.
-
Mortgage Rates and Fixed-Term Options:
- As of August 2023, mortgage rates in the UK have risen significantly due to consecutive interest rate hikes.
- Buyers can expect average interest rates of 6.66% for a 2-year fixed mortgage with a 95% loan-to-value (LTV) ratio.
-
Conveyancing Costs:
- Conveyancing fees for buying a property in 2022 ranged from £850 to £1,620, with the average fee for purchasing a freehold property at £1,320.
-
Stamp Duty and Additional Costs:
- Stamp duty rates, applicable in England and Northern Ireland, stand at 5% for properties costing over £250,000.
- Buyers may also incur additional costs for property surveys, with prices ranging from £300 to £1,500 based on the level of thoroughness.
In conclusion, the current state of the UK mortgage market reflects a complex interplay of factors, including housing prices, interest rates, regional disparities, and additional costs associated with property transactions. Homebuyers and homeowners alike are navigating a challenging landscape influenced by economic shifts and policy decisions.
