The hidden price of WFH: home-working costs soar as mortgage crisis pushes up the true price of spare rooms

Home workers who paid a premium for a dedicated workspace have been punished by soaring mortgage payments
Many Londoners bought larger homes with space for an office when rates were low
Juliet Murphy
Cat Olley13 July 2023

Londoners who stumped up extra funds for a home workspace could be spending more each month than those back in the office — even factoring in savings on commutes, lunches and a daily coffee habit.

New figures from property marketplace Ostrich suggest those that invested in ‘spare’ rooms are the latest victims of the mortgage crisis, as rocketing rates push up the hidden price of working from home.

It calculated the increase in mortgage repayments for households that have bought a property with an extra room, based on an 89 square foot space it says is the average size of a London home’s smallest bedroom.

The capital’s buyers shell out around £837 per square foot, meaning a home office could add £74,493 to the cost of an average mortgage.

But few who embraced the home-working revolution would have factored in such a sharp jump in rates.

In January 2022, when a two-year fixed mortgage with a 75 per cent LTV averaged 2.14 per cent, the extra room would have added £241 to the monthly cost of the mortgage.

Last month, with the same mortgage deal leaping to 6.3 per cent, that cost would have been £370 — an increase of more than 50 per cent.

Ostrich also looked at the cost of a home office in other UK cities, finding that Manchester buyers pay £89 per month, those in Birmingham £72 and Liverpool £54, thanks to far lower average property prices per square foot.

Duncan Jennings, Ostrich’s CEO, said: “For London homebuyers who want extra space to work from home, it has ended up being a much more expensive decision than they originally thought. Londoners are paying almost three times the national average to invest in the space for a home office.

“For a city with so many people working regularly from home, this is an expensive property cost that didn’t really exist a few years ago.  With rising mortgage rates this will put more pressure on homeowners’ salaries over the next year.”

A borough-by-borough analysis revealed that the cost of a home office is highest in Kensington & Chelsea, at an average £147,922. That translates to a monthly mortgage burden of £735, which is followed by Westminster at £645 and Camden at £468.

Borough

Average property price per sq ft

Cost of 89 sq ft home office

Monthly mortgage repayment Jun 23

Change Jan 22 vs. Jun 23

London

£837

£74,493

£370

£130

Kensington & Chelsea

£1,662

£147,992

£735

£257

Westminster

£1,458

£129,731

£645

£226

Camden

£1,058

£94,137

£468

£164

Hammersmith & Fulham

£964

£85,763

£426

£149

Islington

£916

£81,454

£405

£142

Hackney

£814

£72,442

£360

£126

Tower Hamlets

£765

£68,122

£339

£119

Southwark

£762

£67,787

£337

£118

Lambeth

£742

£66,011

£328

£115

Lewisham

£606

£53,967

£268

£94

Greenwich

£571

£50,837

£253

£88

Kensington & Chelsea is also the only borough where the monthly cost of a home office is more than 10 per cent of the gross salary of the average dual-income couple — at 12.12 per cent.

Are you better off back in the office?

When the energy price cap increased last October, home workers were quick to weigh up expensive commutes against the extra cost of heating their homes. Until now, that is where the focus has remained.

The research reveals that the associated increase in energy bills is likely to be dwarfed by the mortgage repayments for a home office in more expensive boroughs, with Hammersmith & Fulham and Islington also coming in above the London average.

But it doesn’t factor in the associated costs of returning to the office, which could add up to almost £400 for a worker who commutes from Zone 3 to Zone 1 and spends £10 a day on food and drink.

That means that a two-person London household that splits the mortgage could be financially better off working from home, though only in the unlikely case that they are sharing a single office space.

The priciest scenario would see one person using a home workspace and the other back in the office, stacking commuter costs on top of high mortgage payments.

What it costs

Back to the office

Zone 1 - 3 monthly travelcard: £184

Daily £3 cup of coffee: £63

Daily £7 lunch: £147

Total: £394

Working from home

Average monthly repayment for home office: £370

Estimated increase in monthly energy costs for home workers living in a flat (Uswitch): £87

Total: £457

Kesha Foss-Smith, regional director at estate agency John D Wood & Co, suggested that buyers should also consider the costs involved in purchasing a property in any equations.

“Pushing themselves now and paying one lot of stamp duty for a larger property [with a home office] that could double up as an extra bedroom or nursery means they could live there for longer — rather than having to sell and buy again in a shorter period of time which leads to multiple additional costs,” she said.

The data also doesn’t consider the value uplift of a potential extra bedroom or office room when it’s time to sell up.

But careful comparisons may be a moot point for those who are yet to invest in a spare room. The increased monthly mortgage burden may have “pushed the dream of a home office beyond the budget of many homebuyers,” says Jennings.

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