In a recent analysis, specialist lender Octane Capital has raised concerns over the escalating annual mortgage costs for both first-time buyers and landlords. The lender examined the current mortgage repayment scenario and projected potential increases in costs if mortgage rates remain stagnant and house prices continue their anticipated ascent.
According to Octane Capital, the prevailing expectation is that house prices will surge by three percent in the coming year. This surge could result in the average first-time buyer house price rising from £236,326 to £243,416, and for landlords, an increase from £284,950 to £293,499.
Presently, the average first-time buyer secures a mortgage of £200,877 with a 15 percent deposit of £35,449. At the current average rate of 4.4 percent, this translates to a total monthly repayment of £1,105.
Octane Capital warns that if mortgage rates remain unchanged and house prices follow the predicted trajectory, a first-time buyer entering the market a year from now could face a monthly repayment of £1,051.
Similarly, under the same circumstances, landlords would also witness an upswing in their monthly repayment costs. Currently, the average buy-to-let mortgage demands a total monthly payment of £1,020 or an interest-only payment of £545 at the average rate of 3.06 percent.
If house prices increase by the projected three percent, Octane Capital estimates that the average cost of a new buy-to-let mortgage would surge by £367 per year for full monthly repayments or £196 per year for interest-only repayments.
Octane Capital’s Chief Executive, Jonathan Samuels, emphasizes, “Market confidence is growing, and buyers have been encouraged by both a freeze on interest rates and a reduction in mortgage rates. This has led to a surge in activity as they look to capitalize on the lower cost of borrowing before it’s too late.”
He continues, “When you also consider that house prices are expected to rise by 3% this year, the decision to sit tight could be a costly one. As our research shows, waiting until the end of the year could result in your monthly mortgage repayment increasing by hundreds of pounds a year.”