Falling house prices can still leave mortgage repayments higher

A lower asking price can ease upfront costs or stretch a deposit further, but monthly mortgage bills may still rise

Shaving £20,000 off a property price sounds like a meaningful saving.

But if mortgage rates have increased since you began searching, a cheaper home can still end up costing more each month than you first planned. The purchase price may be lower, yet borrowing the money has become more expensive.

That raises an important question: how large would a discount need to be before monthly repayments return to budget?

Moneyfacts calculations suggest that, on a £300,000 home, a £20,000 cut may still not be enough.

For a buyer putting down a £30,000 deposit on a 25-year repayment mortgage, the price would need to fall by around £25,600 to keep monthly payments unchanged if the mortgage rate moved from 4.5% to 5.5%.

As house price growth cools and borrowing costs climb, that becomes a real issue for buyers — and one sellers may also need to recognise.

Why a cheaper property can still mean higher repayments

Moneyfacts data shows the average two-year fixed mortgage rate rose from 4.98% in October 2025 to 5.97% on 30 October this year.

What does that mean in practice?

Imagine finding a £300,000 home when mortgage rates are available at 4.5%. With a £30,000 deposit, you would borrow £270,000 and pay about £1,501 a month over 25 years.

If the rate available to you then rises to 5.5% before you complete, the same loan would increase to roughly £1,658 a month.

If the seller agrees to reduce the price, the amount borrowed falls and the repayment drops too. The key issue is whether it drops enough to bring you back within your original budget.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said borrowers should remember that lower house prices may not immediately improve affordability because mortgage rates are far higher than they were a year ago.

What difference would £5,000, £10,000 or £20,000 off make?

Moneyfacts examined three discounts for The Independent, keeping the deposit at £30,000 and the mortgage term at 25 years. Fees are excluded and the figures below are rounded to the nearest pound so they can be compared with the original £1,501 monthly payment in the example above.

The figures show that even a £20,000 reduction still leaves repayments about £34 a month above the original £1,501 payment.

To get back to the same monthly cost, the buyer would need roughly £25,613 off the asking price — bringing the purchase price to about £274,387 and the loan to £244,387.

These numbers are only illustrative. The size of discount needed will vary depending on the rate, deposit and mortgage term.

What happens to the total interest?

A lower purchase price cuts the debt, but a higher rate can still mean paying more interest overall.

If the original £270,000 mortgage stayed at 4.5% for the full 25 years, total interest would be about £180,224. Buying for £20,000 less and borrowing £250,000 at 5.5% would generate around £210,566 in interest over the same period.

That is roughly £30,341 more in interest, which outweighs the initial £20,000 saving.

Of course, that assumes rates remain unchanged for the whole 25 years. A two-year or five-year fix only locks in the rate for the initial period, so these figures show the effect of higher rates rather than what a buyer will necessarily pay in total.

How far can buyers negotiate?

A slower market may give buyers more room to haggle, although any reduction will depend on the property and local demand.

David Hollingworth, associate director at L&C Mortgages, said less competition could give buyers more time to search and more scope to negotiate on price.

He added that a property value and mortgage amount that seemed manageable earlier in the year may now feel tighter, so looking for some flexibility in the purchase price could help soften the impact of higher rates.

Start with the monthly payment you can afford

Before making an offer, get an updated mortgage illustration based on the rate currently available to you, your deposit and the mortgage term you want.

Check how the payment changes at different purchase prices, and make sure mortgage fees and other buying costs are included in your budget. A broker can also see whether a lower price affects the deals you may qualify for.

Ultimately, negotiating a discount does reduce how much you borrow. But if rates have risen since you worked out your budget, make sure you check the new monthly cost before deciding the home remains affordable for the long term.

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