New research by specialist property lending experts, Octane Capital, shows that monthly mortgage payments could increase by £300 each month. 

Homebuyers coming to the end of their mortgage term over the next year could see their costs increase despite having three years worth of payments.  

Mortgage lenders have already removed many products from the market due to fear of further interest rate hikes. Moneyfacts figures show the average deal offered by lenders is now 6.07%.

Mortgages for first-time buyers

Octane Capital predicted average repayments based on the average mortgage rate of 3.74% and the current average house price of £219,089.

The current average rate for a three-year fixed term at a 75% loan to value would also make monthly repayments total £1,125. 

With a 6% increase in 2023 and house prices down 5% to £208,134, the average home buyer would be facing a monthly repayment of £1,341, £216. 

If house prices remain at £129,089, an average rate of 6% requires a £1,412 monthly repayment.

Mortgage payments for existing homeowners

Homeowners at the end of a three-year fixed-term could see a substantial increase in their monthly payments. 

In August 2019, the average rate for a three-year fixed term at a 75% loan to value was 1.73%. This required monthly payments worth £719 per month based on the average house price of £233,366.

Homeowners approaching their renewal date in 2022 would have cleared over £17,000 on their mortgage. However, the rate of 3.74% applied to the remaining £157,792 would still see them pay £810 per month.

Those renewing their three-year fixed term in 2023 will have an average monthly repayment of £1,043 per month. This is a £298 increase on their previous monthly repayment costs, despite having cleared £11,521 off their original mortgage.

Chief executive officer of Octane Capital, Jonathan Samuels, commented: “It’s been a very chaotic few weeks for the mortgage market and this unsettled landscape looks set to remain for the foreseeable future as the threat of further interest rate hikes looms large.”

“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.”

“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.”