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Knocking £20,000 off a house price sounds like a sizeable saving. But if mortgage rates have risen since you started looking, the cheaper home could still cost more each month than you originally budgeted - the price has come down, but borrowing the money to buy it has become more expensive . So, how big a discount would you need to bring the monthly payments back within budget?
Calculations from Moneyfacts show that, on a £300,000 home, even £20,000 off may not be enough. A buyer with a £30,000 deposit and a 25-year repayment mortgage would need a reduction of about £25,600 to keep their monthly payments unchanged if their mortgage rate rose from 4.5 to 5.5 per cent. It’s a real dilemma for buyers as house price growth slows and borrowing costs climb - and therefore something sellers may have to understand, too.
Why a cheaper home can mean a bigger monthly bill Moneyfacts figures show the average two-year fixed mortgage rate rose from 4.98 per cent in October 2025 to 5.97 per cent on 30 October this year. How much does that really impact you? Imagine you found a £300,000 home when you could get a mortgage at 4.5 per cent.
With a £30,000 deposit, you would borrow £270,000, costing about £1,501 a month over 25 years. But before you buy, the mortgage rate available to you rises to 5.5 per cent. On the same loan, repayments would jump to around £1,658.
If the seller then agrees to cut the price you can borrow less, which brings the payment down. The question is whether it falls far enough to get back to your original budget. Rachel Springall, finance expert at Moneyfactscompare.co.uk, says: “Borrowers must be aware that lower house prices might not immediately be enough to improve affordability because mortgage rates are much higher than they were a year ago.” Invest at least £100 in Stocks or ETFs of your choice.
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Moneyfacts tested three discounts for The Independent , keeping the cash deposit at £30,000 and the mortgage term at 25 years. Fees are excluded and amounts rounded to the nearest pound in the table below, to allow a comparison to the original £1,501 a month from our example above. Discount off price Purchase price Mortgage at 5.5% Monthly repayment £5,000 £295,000 £265,000 £1,627 £10,000 £290,000 £260,000 £1,597 £20,000 £280,000 £250,000 £1,535 As the data shows, even the £20,000 reduction leaves repayments about £34 a month above the original £1,501 monthly payment.
To bring them back level, the buyer would need approximately £25,613 off - paying about £274,387 for the property and borrowing £244,387. These are illustrative numbers - the discount needed will change with the rate, deposit and repayment term. What about the total interest?
A lower purchase price reduces the debt, but a higher rate can still mean paying more interest. If the original £270,000 mortgage stayed at 4.5 per cent for all 25 years (improbable of course), the total interest would be about £180,224. Buying for £20,000 less and borrowing £250,000 at 5.5 per cent would produce about £210,566 in interest over the same period.
That’s roughly £30,341 more interest, far outweighing the original £20,000 price saving. However, this assumes both rates remain unchanged for the entire 25 years. A two-year or five-year fix only sets the rate for that initial period, so these totals illustrate the effect of higher rates rather than predict what a buyer will actually pay.
Getting £20k off the asking price could still leave you paying more month to month (PA) How hard can you negotiate? A quieter market may give buyers more room to bargain, although a discount will depend on the property and local demand. David Hollingworth, associate director at L&C Mortgages , says: “However if there’s less competition for property it could give buyers a better chance to take their time in their property search and negotiate harder on price.” He adds: “A property value and mortgage amount that looked very manageable earlier in the year may feel tighter now, so considering if there’s some room for manoeuvre in purchase price could help to at least ease the blow of higher rates.” Start with the monthly payment you can afford Before making an offer, get an updated mortgage illustration using the rate available to you now, your cash deposit and your chosen repayment term.
Ask how the payment changes at different purchase prices, and include mortgage fees and other buying costs in your budget. A broker can also check whether a lower price changes which deals you qualify for. Ultimately, a negotiated discount still reduces what you borrow.
But if rates have risen since you worked out your budget, check the new monthly bill before deciding the home is affordable for the long term. When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.
Source: The Independent
