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Mortgage Costs Rise By A Third

According to a report published earlier this week by mform, a newly launched online mortgage company, the annual average cost of paying a UK mortgage has risen by a third in the past three years.

English CottageThe annual average mortgage repayment for UK homeowners in 2003 was £4,711, today this figure has jumped to £6,284.

While interest rates have risen in the three year period of the survey, the survey found that the underlying reason for the rise in the annual cost of paying a UK mortgage has more to do with the continued property boom in the UK than as a direct result of the increasing interest rates on UK home loans themselves.

mform’s survey, undertaken by YouGov, polled 2,150 UK homeowners from across the country and found that while interest rates has risen from an average of 4.29 percent three years ago to 5.41 percent today, 1.28 million Brits were now having to spend more than £1,000 per month repaying their home mortgage loan – with 55 percent of those paying more than £1,000 living in the London area.

Increases in interest rates and UK property prices were found not to be the only reasons for the increased repayment costs to UK homeowners. Additional burdens were being placed on UK homeowners with hiked mortgage application fees, which, according to Julia Harris of price comparison service Moneyfacts, have trebled since 1996. An increases in the number of UK properties subject to stamp duty and exit fees have also added to the overall cost burden of purchasing a UK property today.

None of this, however, seems to have dampened the desire to join the UK housing market. Recent figures published by the Council of Mortgage Lenders (CML) show October as being another record month for UK mortgage lending, with UK mortgage providers lending a total of £30.3 billion for the month. This represents a 12 percent increase in UK home mortgage lending year-on-year from October 2005. While this figure is still slightly short of the record £33 billion lent in August of this year, the UK housing market remains in a “robust shape” according to Michael Coogan, director-general of the CML.

Mr. Coogan also commented that “house price growth is also strong, so we expect to see lending remaining at high levels through the New Year.” This despite the fact that UK homeowners are now faced with the very real prospect of having to pay higher purchase prices for UK property, with rising interest rates and increased costs for applying for a UK home loan, and a much higher chance of having to pay stamp duty on your UK property purchase transaction.

Richard Smith
23rd November 2006


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