Home purchasing

The price and ongoing costs of buying a property at the top of the scale

Based on the current average UK property price of £283,496, a 25% down payment (£70,874) and a three year fixed rate mortgage at a rate of 2 .97%, research by mortgage broker Henry Dannell shows that the average UK homeowner needs an income of £47,249 to secure a mortgage based on a 4.5 times income multiple.

Once they have done so, they will pay £1,005 a month to pay off their mortgage, with the total cost of their loan reaching £301,489 over the term of the mortgage, which equates to £88,867 paid in interest .

In London as a whole, the income required to secure a mortgage jumps to £87,697 on the current London property price of £526,183 – once a deposit of £131,546 has been placed. Over the life of the mortgage, this will equate to a total loan payment of £559,578, with interest alone amounting to £164,941.

However, on the London Prime Market, a £5m property purchase would require a 25% down payment of £1.25m. Once this has been placed, the average income required to secure a mortgage is still £833,333 a year.

What about the monthly cost of paying off a mortgage on a £5m house? £17,724 a month, with a total of over £5.3m paid over 25 years, including £1.6m in interest only.

Geoff Garrett, manager of Henry Dannell, commented: “It’s fair to say that we’ve had one of the most sustained periods of borrowing affordability in living memory, but a sixth consecutive base rate hike will continue to dampen our ability to borrow at relatively low cost.

“That means the cost of borrowing to buy will start to climb whether you do it at the UK mid-price threshold or £5m+.

“Of course, for those who are already paying close to £18,000 a month to pay off their mortgage, any increase will be much more noticeable in terms of pounds and pence.”