Research shows mortgage costs may drop next year

November 22, 2022 by Brendan O'Neill

Mortgage Advisors

The most recent increase in the base rate from the Bank of England (BoE) means that those with mortgages could face a monthly rise of £166, but new research suggests that mortgage costs will fall next year.

This research has been carried out by Octane Capital and it indicates that borrowers will see a drop of £188 per month in their mortgage payments next year. The company based its analysis on home ownership costs with a 75% loan to value (LTV) variable rate loan that has a repayment term of 25 years.

What it shows is that the price of variable rate loans was £895 a month on average a decade ago, at a time when the average rate was set at 4.29%. Interest levels that borrowers had to pay at that time were around £103,993.

What has sparked the big rise in mortgage payments is the change in the base rate. For the past 10 years, it has stayed at 1% or below, only for it to suddenly start rising in the early summer of this year. It is now at 3%, which could push mortgage rates up to 6.34%.

Octane is expecting them to fall to 4.93% by the end of 2023 but is stating that house price drops could mean any even greater reductions in mortgage payments.

Jonathan Samuels from Octane stated that after years of good fortune, borrowers with variable rate mortgages had experienced the downsides recently.

Advisors with CeMAP training and borrowers will hope this analysis is correct.