Then and Now: A tale of changing mortgage rates

Posted 22/02/2024

As any buyer will tell you, mortgage rates play a pivotal role in shaping the affordability of homes. Whether you are a first-time buyer, planning to move into a large family home or considering your options to downsize, a few months can witness significant fluctuations leading to substantial changes in your monthly mortgage payments and overall cost of homeownership.

These fluctuations in mortgage rates can directly impact your purchasing power and influence the type of home you can afford. For first-time buyers, even a slight increase in rates can mean stretching the budget or compromising on certain features or locations. Likewise, for those looking to upgrade to a larger home, higher rates could translate to higher monthly payments, potentially affecting their ability to qualify for a loan or forcing them to reconsider their housing goals.

In the last few months, this has played out as we examine the stark comparisons between mortgage payments from September 2023 to February 2024. We take a closer look at how these changes have impacted prospective homeowners in two prominent London developments: The Garratt Collection in Earlsfield, SW18 and Ecole in Bermondsey, SE16.

The Garratt Collection
This stylish development features 36 homes comprising one, two and three-bedroom apartments and four-bedroom houses with modern, spacious design, high specification and a wide variety of layouts. Offering convenient city living with excellent transport links and green spaces nearby. With excellent transport links, the nearest overground station, Earlsfield, is just an 11-minute walk; Southfields underground station is a 20-minute walk.

Impact of mortgage rates
Property type: Two bedroom, two bathroom apartment
In September 2023, securing a mortgage for a £700,000 two-bed, two-bath apartment meant monthly payments of £3,468 at a 6.19% interest rate. However, fast forward to February 2024, and the picture changes dramatically. With a reduced interest rate of 4.82%, monthly payments plummet to £2,935, resulting in a substantial saving of £533 per month.

Property type: Four bedroom, two bathroom house
Similarly, for those eyeing the spacious comfort of a four-bed, two-bath house priced at £1,350,000, the savings are even more pronounced. From £6,689 per month in September 2023, payments drop to £5,660 in February 2024, marking a remarkable monthly saving of £1,029.

Ecole offers 30 private studio, one and two bedroom apartments and two and three-bedroom duplexes in Bermondsey. Perfectly situated for urban living, the development emphasises sustainability and community with secure cycle storage, communal spaces including a green roof and terrace, and ample natural light in the spacious homes. Ideal for travel, Bermondsey tube on the Jubilee line is a 10-minute walk away from Ecole and has direct links to Bond Street, Waterloo, and London Bridge.

Impact of mortgage rates
Property type: One bedroom, one bathroom apartment.
The light filled and spacious homes have demonstrated another glimpse into the fluctuations of mortgage rates. For a £485,000 one-bed, one-bath apartment, borrowers saw their monthly payments decrease from £2,403 to £2,033, resulting in a notable saving of £370 per month.

Property type: Two bedroom, two bathroom apartment
Similarly, for those looking for a large property, the savings are even greater. For a £650,000 two-bed, two-bath apartment, the shifting rates meant that payments dropped from £3,221 to £2,725 per month, offering a monthly saving of £496.

Optimising strategies for fluctuating mortgage rates
The Garratt Collection and Ecole have clearly demonstrated the tangible impact of fluctuating mortgage rates on the affordability of properties. For prospective buyers, these changes could mean the difference between owning their dream home or settling for less. Moreover, for current homeowners, the decreased financial burden opens avenues for investment, savings, or enhancing the quality of their life. While the property market remains dynamic and subject to various influences, these fluctuations in mortgage rates underscore the importance of timing and seizing the opportunity in navigating the journey to homeownership.