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95% Mortgage Borrowers paying £300 more than renting

The latest research has shown that new mortgage borrowers with 95% mortgages are on average £300 per month worse off than renting. This article explains what needs to happen to make 95% mortgage the cheaper option to help UK households save money.

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 19 June 2024

2 min read

95% Mortgage Borrowers paying £300 more than renting

The latest research has shown that new mortgage borrowers with 95% mortgages are on average £300 per month worse off than renting. Before mortgage rates increased in 2021, the figure was roughly the same for renters and new 95% mortgage borrowers.

In a survey carried out by Hamptons in 2024, the data revealed that the average new home buyer with a 5% deposit would now be worse off than if they continued renting. The increase in mortgage rates to 6.1% has meant that there is now a significant cost to buying a home rather than renting.

The data also shows that the mortgage rates would need to drop from 6.1% to 4.2% for the cost to be neutral again in the UK. As always, London is the exception and mortgage rates would need to drop to 3.6% to be the same as renting for 95% mortgage borrowers.

95% mortgages have been a popular option for several years, as a way to help first time buyers to buy a home more quickly. This video from an interview on This Morning shows financial expert Martin Lewis explaining exactly how this type of mortgage works for UK borrowers.

Currently, renting still remains the most cost-effective option for many households in the UK as more people struggle to get a foot on the property ladder. Affordability is now the single biggest barrier for first-time buyers looking to buy their first home.

According to this report, the regions most affected were:

Costs of buying in London and the South West are significantly than in other areas of the country, which continues to pose a problem for renters looking to buy. Other areas of the UK were less impacted by the increases in mortgage rates.

The average age of first-time buyers in the UK has also shot up in the past 3 years from 32 years to 36 years of age. We also wrote an article recently about the number of parents who are first-time buyers which has doubled since 2009, according to research from Santander.

Pressure continues to grow on the government and Bank of England to lower mortgage interest rates as well as giving more support to first-time buyers in the UK. Help to Buy schemes and Stamp Duty reforms also need to be significantly better to help those who need it.

Recent mortgage news and guides

Here are more recent mortgage news stories affecting homeowners across the UK.

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Is a fixed rate mortgage a good idea now?

High mortgage interest rates have caused stress and concern for families across the UK over the last few years, and switching to a fixed rate mortgage can help in some situations.

A fixed rate mortgage offers more financial security compared to a variable rate, as your mortgage payments won't change during your 'fixed term'. You can choose for your mortgage rate to be fixed for either 2, 3, 5, or 10 years, depending on your lender and which option feels right for you.

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Everything you need to know about fixed rate mortgages - MPO

Will mortgage rates go down in 2024 UK?

Our MPO Money Mum & Dad are constantly checking the market to see what is happening with UK mortgage rates. Many economic experts now believe that the Bank of England base rate will go down by 0.25% in the Summer of 2024, with rates potentially settling at around 3.5% next year.

Banks will generally use the BoE base rate to decide which mortgage rates to offer, and certain types of mortgage (tracker rate mortgages) will be directly affected by any BoE rate changes.

What is the current mortgage rate UK?

UK mortgage rates will change over time, and currently the Bank of England (BoE) base rate is 5.25%. The BoE interest rate directly affects how much people on tracker rate mortgages will pay, and can also cause lenders to adjust their Standard Variable Rates.

Our MPO mortgage experts are constantly checking the rates on offer from each mortgage lender, to keep UK consumers up to date with the latest changes.

How much do you need for a mortgage in UK?

It can be hard to figure out how much money you need to earn to get certain types of mortgage -especially if you are a first time buyer or it's been years since you applied for one.

A lot of UK lenders will want you to earn at least £20,000 per year to qualify for a mortgage, but this isn't a general rule. People with lower incomes may still be able to get a mortgage based on:

  • Your credit score/credit history
  • The mortgage lender that you apply to
  • The type of mortgage that you need
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How much do I need to earn to get a mortgage? - MPO

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