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Mortgage repayments set to rise by over £400 per year

Mortgage repayments set to rise by over £400 per year
Anna Sagar
Written By:
Anna Sagar
Posted:
12/02/2024
Updated:
26/02/2024

First-time buyers in the UK could see the annual cost of their mortgage go up by around £398 per year in 2024, research has shown.

According to research from Octane Capital, the annual cost of mortgages for landlords could increase by £367 year-on-year (YOY).

The firm analysed the cost of repaying a mortgage for landlords and first-time buyers and how this cost could change should mortgage rates fail to fall and house prices climb as expected.

The consensus is that house prices will rise by 3% over the course of the year, while average first-time buyer house prices will go from £236,326 to £243,416, and the average cost for landlords jumping to £293,499 from £284,950.

The average first-time buyer needs a mortgage of £200,877, assuming a 15% deposit of £35,449, with the average rate sitting at 4.4%, equal to a monthly payment of £1,105.

If mortgage rates fail to fall and house prices rise as predicted, then monthly repayments are going to be £1,138. This amounts to an extra £33 per month or £398 per year.

The average buy-to-let (BTL) mortgage currently requires a full monthly payment of £1,020 or an interest-only payment of £545 at the average rate of 3.06%.

If house prices increase by 3% as predicted, this would see the average cost of a BTL mortgage increase by £367 per year if making a full monthly repayment, or £196 per year if making an interest-only repayment.

Market confidence ‘growing’ but mortgage repayments will rise

Octane Capital CEO Jonathan Samuels said: “Market confidence is growing and buyers have been encouraged by both a freeze on interest rates and a reduction in mortgage rates. This has led to a surge in activity as they look to capitalise on the lower cost of borrowing before it’s too late.

“Those considering a purchase this year would be wise to follow suit. In recent weeks, we’ve seen signs that swap rates are starting to creep up, which indicates that mortgage rates are likely to do the same.

“When you also consider that house prices are expected to rise by 3% this year, the decision to sit tight could be a costly one. As our research shows, waiting until the end of the year could result in your monthly mortgage repayment increasing by hundreds of pounds per year.”