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Monthly average mortgage payment rises by £300
Monthly payments for average homebuyers coming to the end of their deals could rise by up to £300 a month.
According to analysis by specialist lender Octane Capital, new buyers looking for a three-year fixed term at 75 per cent loan to value (LTV) can expect an average monthly repayment of £1,125, based on the current average mortgage rate of 3.74 per cent and average house price of £219,089.
The firm said that recent turmoil in the mortgage market led to products being pulled and mortgage rates are now forecast to rise to as high as six per cent. It added that some analysts had predicted house price growth could stall or decline by as much as five per cent.
If the average mortgage rate climbs to six per cent in 2023, and house prices fall by five per cent, a new buyer’s monthly repayment could increase to £1,341, which is a £216 uplift.
Additionally, if house prices remain the same, but the average mortgage rate rises to six per cent, then monthly mortgage payments for a new buyer could increase to £1,412, which is £286 higher than current levels.
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Existing homeowners could see ‘substantial difference’ in monthly payments
Octane Capital said that for existing homeowners coming to the end of a three-year fixed rate term could see a “substantial difference” in their monthly payments.
In 2019, the average rate for a three-year fixed rate at 75 per cent loan to value (LTV) was 1.73 per cent, bringing monthly mortgage payments to around £719. This is based on the average house price of £233,366 at the time.
Those coming to the end of their deal in 2022 would have cleared around £17,000 on sum owed on their mortgage.
However, the average current rate for a three-year fixed rate is 3.74 per cent, so payments would be £91 more at £810 per month.
Those coming to the end of their deal in 2023 could see monthly payments rise to £1,043 per cent, which is a £291 increase on prior monthly costs.
‘Unsettled landscape’ set to continue
Octane Capital’s CEO Jonathan Samuels (pictured) said that it had been a “very chaotic few weeks” in the mortgage market and the “unsettled landscape” could remain as further interest rate rises look likely.
He continued: “Those looking to lock in a three-year fixed term today will be facing considerably higher repayment rates compared to three years ago, with the average repayment now over £400 more per month.
“Despite this, those considering a purchase are best advised to do so now, as sitting on the fence could see you paying between £200 and £300 more a month come next year, with mortgage rates forecast to hit six per cent.”
He added: “For those approaching the end of their three-year fixed term, now is also the time to lock in a fresh deal. Currently doing so will see you pay around £90 more a month but this cost is set to climb to almost £300 more per month for those due to renew next year.”