This year, monthly mortgage payments could drop by 25pc

Borrowers could pay £4,500 less annually in November 2023 than in November 2022

New analysis has shown that monthly mortgage payments could fall as much as 25% for borrowers as mortgage rates and house prices continue to decline.

After taking into account the predicted fall in house prices as well as mortgage rates, a borrower would pay £4,500 per year less than a borrower who took out a similar loan last November. Wealth manager Quilter said.

The average UK property cost £294,910 in November 2022. At that time, mortgage rates were at 6pc. Monthly mortgage payments for those who purchased a house at this cost, with a term of 25 years and an 80pc loan-to-value ratio, will be around £1,520.

If there is an 8pc drop in house prices, as Halifax recently predicted, mortgage rates (currently 4.55pc) would drop to about 4pc. Quilter calculated that monthly payments for borrowers who take out equivalent loans would fall to £1,145, a 25% reduction from the previous year.

Anderson Harris’ Adrian Anderson stated that he has witnessed a recent rise in inquiries from first-time buyers who want to take advantage of the anticipated falling prices and fixed mortgage rates.

He stated that “For those who are looking to buy a property and apply to a fixed-rate mortgage in 2023, the current outlook is better than in Q4 last Year. The prediction is that property prices in certain areas will fall this year and that fixed-rate mortgages will continue to decrease from the high fixed rates seen shortly after the mini-Budget crisis of 23 September 2022.”

Anderson cautioned that there would be winners and losers in this market, as with all other scenarios.

He stated that although this may be good news to those looking to buy a home, mortgage rates are still extremely high in comparison to the low rates homeowners enjoyed over the past 14 years. Therefore most current borrowers will continue to pay a substantially higher mortgage rate if they end their deal in 2023. Remortgaging may be affected by a decrease in property value.

The average mortgage payment rose by 66pc in the last year, compared to the £918 per month for the same property and mortgage deal in 2021 when interest rates were at 2pc, and house prices were 10.3pc higher.

There was a wide range of price increases in the country’s housing market in the past year. An average monthly mortgage payment of a North West borrower with a loan value of 80pc grew by 70pc in the past year. Londoners, who saw a smaller increase in house prices, had the lowest percentage increase in mortgage payments, but they were still higher by 58.6pc.

Karen Noye of Quilter said that rising mortgage rates played a significant part in making it affordable to buy a home or move home. For many, these costs were too high. If house prices and mortgage rates continue falling, it is a positive sign that we can expect to see a significant drop in monthly mortgage payments this year.

She said that there was no guarantee that the changes in the housing market would be realized in the manner that had been expected. Although inflation is still extremely high, people’s purchasing power has been severely affected by rising energy costs. Thankfully, we now see that the peak is over.

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