Confidence returning to the market as mortgage payments continue to fall

Following last September's mini-budget, the market was thrown into turmoil, forcing up interest rates and making life much more expensive for mortgage-paying homeowners. However, there are signs that some welcome stability is returning to a previously unsettled market.

Related topics:  Housing,  Property Market,  Mini Budget
Property | Reporter
26th January 2023
FTB 824

In August 2022, just before the mini-budget, a typical 2-year fixed-rate mortgage at 75% LTV with a 25% deposit and an interest rate of 3.6%, resulted in an average monthly mortgage repayment of £1,113. By October, the impact of the mini-budget meant that the average rate increased to 6% causing the average mortgage repayment to rise by 28.5% to £1,430 per month.

However, the negative impacts of the mini-budget didn’t last long and by the end of the last year, stability was starting to return.

Analysis from specialist property lending experts, Octane Capital, highlights that this has continued into January 2023 to the extent that homebuyers looking to make a purchase today can expect to pay £1,200 per month for their mortgage, a 14% reduction in the monthly cost of borrowing.

It’s even better news for those looking to buy with an interest-only mortgage. Between August and October of last year, the cost of the average interest-only mortgage repayment climbed by 68.2%. This has since dropped by -24.5% between October 2022 and today.

Jonathan Samuels, CEO of Octane Capital, commented: "The disastrous mini-budget, and the Trussenomics it was based upon, resulted in a great deal of market uncertainty which, in turn, led to reduced levels of buyer activity and cooling house prices during the closing stages of 2022.

"However, those buyers who sat tight and weathered the instability have now been rewarded with a swift drop in the cost of borrowing and this has helped to steady the ship already this year.

"As this confidence builds further, we expect rates to keep reducing and this will help rejuvenate the market as buyers return to continue their quest of homeownership.”

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