Mortgage interest payments down -22% versus 30 years ago

Research by Henry Dannell, a leading specialist in bespoke mortgage solutions, has revealed how the cost of a mortgage for today’s homebuyers is 22% more affordable than it has been over the last three decades.

The research by Henry Dannell looked at the cost of the average mortgage back in 1991 and how it compares to today once adjusted for inflation.

The research shows that today, the average property will cost you £274,712 and at a loan to value of 95%, this requires a deposit of £13,736 with homebuyers borrowing the remaining £260,977.

Based on a 25-year term and an average mortgage rate of 3%, the nation’s homebuyers are currently paying interest of £652 per month, with the average cost of repaying their mortgage coming in at £1,238.

30 years ago, the average property would have cost £57,435 in total, with a deposit of £2,872 required before borrowing the remaining £54,563.

While the average mortgage rate was far higher at 8%, this meant the average homebuyer was paying interest to the tune of £365 per month with mortgage repayments sitting at £421. However, what does this look like once adjusted for inflation?

House prices have climbed considerably since the 90s and so even after adjusting for inflation, the average cost of repaying a mortgage in 1991 still sits at just £962. This means that the £1,238 paid by today’s homebuyers is 29% higher than 30 years ago.

However, the average cost of an interest-only payment in 1991 climbs to £832 per month once adjusting for inflation. This means that the £652 in interest paid per month by today’s homebuyers is -22% less than the predecessors 30 years ago.

Director of Henry Dannell, Geoff Garrett, commented: “House prices have climbed considerably since the nineties and so even when adjusting for inflation, the current cost of repaying a mortgage is always going to be higher than that faced by homebuyers historically.

“However, this isn’t the case when it comes to the interest paid and in fact, the cost of servicing a mortgage is actually lower now than it was thirty years ago.

“While this is now starting to climb in line with an increase to the base rate, homebuyers remain in a very favourable position and although we can’t reduce the overall cost of buying, there’s no doubt the mortgage sector has helped thousands to overcome it at a far more affordable cost in recent years.”