Personal Finance

Hardworking Britons who own more of their home penalised by rising mortgage rates

Mortgage holders who own more of their home outright are being penalised most when it comes to rising interest rates. Here's what we know.

The Bank of England raised the base rate to 3.5% from 3% in its December review, in its battle against high inflation.

While it’s good news for savers, the BoE’s ninth consecutive rise will hit borrowers, including mortgage holders, who are likely to pay even more if on a standard variable rate, tracker, or when securing a new fixed rate deal.

Last year, those with a lower loan to value percentage (ie, those who have more equity in their home) were being charged up to 2.5 percentage points less than those with higher LTV rates, research by NimbleFins found.

Now, those who have a 75% LTV rate are paying almost the same as those with a 95% LTV rate as lenders close the gap.

Our research found those with a 75% LTV rate are being charged 3.9 times more on a fixed rate mortgage than they were 12 months ago.

This compares to those with a 95% LTV being charged 2.3 times more for a fixed rate mortgage than they were a year ago.

It is a similar picture for variable mortgages, with rates 2.3 times higher for 75% LTV compared to 1.2 times higher for a 95% LTV mortgage.

Mostly, although not as advantageous as it was a year ago, it is very slightly cheaper to borrow against a 75% LTV home than a 95% LTV. But NimbleFins found mortgage holders with a 90% LTV were actually being charged more than someone with a 95% loan to value ratio when it came to two-year variable loans.

You can see these figures bolded in the table below.

95% LTV90% LTV75% LTV95% LTV90% LTV75% LTV
How much higher are rates now?1.2X1.6X2.3X2.3X3.1X3.9X

Erin Yurday, co-founder and CEO of NimbleFins said:

"Lenders used to charge quite a bit less for loans with lower loan to value ratios - up to 2.5 percent less in 2021 - because it's seen as less risky. Basically if a homeowner were to default on their payments and the lender repossessed the home, it would need to recoup a smaller percentage of the house value to repay the debt.

"Charging lower interest to people who own more of their home also incentivises borrowers to repay their mortgages quicker.

"While the current mortgage rates are painful for all borrowers, it's not fair that hardworking Britons who are prudent with their money and look to the future are being penalised in this way.

"I was also surprised to see that people with a 90% LTV are actually now being charged more than those with a 95% LTV on variable mortgages. It doesn't seem right that those who may have worked hard to scrimp and save to get more equity in their home are being hit like this."

See our full research here.

Helen Barnett

Helen is a journalist, editor and copywriter with 15 years' experience writing across print and digital publications. She previously edited the Daily Express website and has won awards as a reporter. Read more here.


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