You are here: Home - Mortgages - First Time Buyer - News -

Monthly average mortgage payment rises by £300

Written by: Anna Sagar
Monthly payments for average homebuyers coming to the end of their deals could rise by up to £300 a month.

New buyers looking for a three-year fixed term at 75% loan to value (LTV) can expect an average monthly repayment of £1,125, based on the current average mortgage rate of 3.74% and an average house price of £219,089.

According to specialist lender Octane Capital, recent turmoil in the mortgage market led to products being pulled and mortgage rates are now forecast to rise to as high as 6%. It added that some analysts had predicted house price growth could stall or decline by as much as 5%.

If the average mortgage rate climbs to 6% in 2023, and house prices fall by 5%, 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 6%, then monthly mortgage payments for a new buyer could increase to £1,412, which is £286 higher than current levels.

‘Substantial difference’ in monthly payments

Octane Capital said for existing homeowners coming to the end of a three-year fixed rate term, they could see a “substantial difference” in their monthly payments.

In 2019, the average rate for a three-year fixed rate at 75% LTV was 1.73%, 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 the sum owed on their mortgage.

However, the average current rate for a three-year fixed rate is 3.74%, 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, which is a £291 increase on prior monthly costs.

‘Unsettled landscape’ set to continue

Octane Capital’s CEO Jonathan Samuels 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 said: “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 6%.”

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.”

Related: See’s ‘Repossession is a last resort’: Five options if you’re struggling with your mortgage and Seven options if you’re coming to the end of your mortgage fix for more information.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week