Ten years on from the EU referendum, UK borrowers are contending with rates close to 5% and fresh political uncertainty
A decade has passed since the UK voted to leave the European Union, and new research from L&C Mortgages illustrates how dramatically the mortgage market has shifted in that time.
Tracking the lowest rates from the top 10 UK lenders, L&C found that the average two-year remortgage rate for borrowers with a 40% deposit stood at 1.52% on referendum day in June 2016. That figure has since risen to 4.61% — a threefold increase. The average five-year remortgage rate has more than doubled over the same period, moving from 2.20% to 4.66%.
The monthly cost impact is substantial. On a £200,000 repayment mortgage over 25 years, borrowers are now paying approximately £322 more per month than in 2016, equivalent to nearly £3,870 more per year.
Purchase rates have followed a similar trajectory. The average two-year rate for homebuyers with a 10% deposit was 2.48% in June 2016 and now stands at 4.93%. The average five-year purchase rate has risen from 3.29% to 4.84% over the same period.
The rate environment has been shaped by a range of factors over the decade, including the COVID-19 pandemic, a sharp rise in inflation, the September 2022 mini budget, and geopolitical instability in Ukraine and the Middle East — all of which pushed up funding costs for lenders.
That shift in borrowing costs has coincided with broader disillusionment: separate research from specialist mortgage lender Together found that half of British adults believe Brexit has harmed the housing market to some degree.
"The rate environment has shifted dramatically since the referendum and borrowers have had to adapt to a radical change in mortgage costs," said David Hollingworth (pictured right), associate director at L&C Mortgages. "Base rate sits at 3.75% today compared to just 0.50% at the time of the vote to leave the EU and then dipping further to 0.25% in the following months.
"A lot has happened in the mortgage market over the last ten years, but a generation of borrowers that was used to rock bottom interest rates have had to recalibrate. Ultra-low rates became the norm over a prolonged period, so the rapid uplift has made life difficult for homeowners.
"First-time buyers and homemovers are now navigating a market where rates of close to 5% or more have become typical, which may not dull the desire to buy but does transform how people think about their mortgage choices.
Hollingworth noted that political uncertainty continues to echo the climate of 2016. "The vote to leave resulted in a change of prime minister, and borrowers today are again wondering what another change at the top will mean for them, following Keir Starmer's resignation," he said.
"Markets don't like uncertainty, so borrowers may face more volatility to come. What is clear is that reviewing the mortgage and taking as much control as possible will improve the chance of getting the best possible value for your mortgage."
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