Mortgage payments may drop by 25% per month

Monthly mortgage payments could drop 25 percent over the next 12 months, according to research from Quilter. It comes after the latest government house price index data showed the average UK property cost £294,910 in November 2022. Interest rates have risen dramatically over the past year as the Bank of England raised the base rate in a bid to mitigate the impact of inflation. .

Mortgage rates for homeowners have peaked at six percent in the wake of the disastrous mini budget from former Prime Minister Liz Truss’ government.

Anyone who bought a property at this price of £294,910 and a 25-year mortgage rate, with a loan-to-value ratio of 80%, would face a monthly mortgage payment of £1,520.

This represents a 66 per cent increase on the £918 per month in mortgage payments for the equivalent property and mortgage deal in the previous year.

With experts looking ahead to November 2023, if house prices fall by eight per cent as Halifax forecasts and mortgage rates continue their current downward trend to around four per cent, the median house price in the UK could drop to £271,317.

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As a result, monthly mortgage payments will drop by 25 per cent compared to the previous year, to £1,145.

In light of this, if these forecasts are correct, November 2023 will be a “real positive” for homeowners and may motivate people to buy a new property.

Karen Noe, mortgage expert at Quilter, breaks down what households can expect later in the year.

She explained: “Rising mortgage rates have played a significant role in being able to afford the costs of buying a first home or moving into a home, and for many these costs have been pushed to unsustainable levels.

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“So it’s really positive that as we look forward we can hope to see such a significant decline in monthly mortgage payments by the end of the year if home prices and mortgage rates continue to fall as expected.”

According to a mortgage expert, certain areas of the UK have been hit worse by rising house prices and the resulting increases in mortgage payments following the Bank of England’s recent intervention.

Overall, the North West of England has seen the largest increase in monthly payments over the past year.

By comparison, Londoners experienced the smallest spikes in terms of percentage increase over this time period.

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However, those who lived in the capital of the United Kingdom still made huge mortgage payments because the costs were already so high.

As it is, the country’s base rate is 3.5 percent causing interest rates and mortgage payments to rise as a result.

With inflation showing signs of slowing, homeowners are hopeful that mortgage rates will follow suit in the coming months.

Ms Noe added: “However, there is no guarantee that changes in the housing market will materialize in the manner foreseen.

“Inflation remains incredibly high and people’s purchasing power has taken a real hit as a result, particularly with higher energy bills, but fortunately we are now looking to pass the peak.

Lower inflation should mean interest rates stabilize and even start to fall with mortgage rates following suit.

“This could see mortgage rates drop to four percent by the end of the year and maybe even lower in the future which would have a real impact on monthly mortgage costs, particularly for variable rate mortgages, and could see more people considering buying a home.” New where possibility becomes within everyone’s reach.

“The last few years have shown just how unpredictable the housing market really is, but hopefully, we are now off the other side of what was a very turbulent few years and we will gradually see a moderation in terms of rising costs.”


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