The average monthly mortgage repayment has fallen by 14%, or hundreds of pounds, since the September mini-Budget, “suggesting stability is returning to a previously unsettled market”, data from Octane Capital shows.
Just before former Chancellor Kwasi Kwarteng’s fiscal statement last August, a typical two-year fixed-rate mortgage at 75% loan to value with a 25% deposit and an interest rate of 3.6%, resulted in an average monthly mortgage repayment of £1,113, says the specialist lender.
However, the tax-cutting September mini-Budget accelerated already rising mortgage rates. Action taken by current Chancellor Jeremy Hunt in October and in the November Autumn Statement calmed markets, although home loans remain elevated.
The lender says 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.
But it adds: “The negative impacts of the mini-budget didn’t last long and by the end of the last year, stability was starting to return.”
It says that this month, 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.
The firm adds that borrowers opting for interest-only mortgages can make further savings.
Between August and October of last year, the cost of the average interest-only home loan repayment climbed by 68.2%, but this has since dropped by 24.5% between October and today.
Octane Capital chief executive Jonathan Samuels says: “The disastrous mini-budget, and the Trussenomics it was based on, 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.”
