Total mortgage repayments are set to fall in 2023 according to the latest analysis by Octane Capital.

However, a jump in the level of regular and lump sum payments made is also expected, as increasing interest rates and the highest cost of borrowing push homeowners to utilise spare cash and overpay on their instalments in order bring down their mortgage.

Octane Capital analysed historic mortgage repayment data from the BSA looking at the breakdown of mortgage repayments made and how the market is expected to perform come the end of the year.

The research shows that the total sum repaid on a monthly basis across the mortgage space hit £254.4bn last year, a 7% increase versus the previous year and yet further positive movement on the 19% increase during the pandemic boom period of 2020 and 2021.

However, so far this year (Jan to June latest data available), total mortgage repayments have fallen at an average rate of 1.2% per month, currently sitting at £18.9bn in June versus £21.4bn at the start of the year.

Based on current market performance, Octane Capital estimates that come the end of the year, the total sum of mortgage repayments made in 2023 could sit some 12.1% below that of 2022, totalling £223.7bn.

This decline is expected to be driven by an estimated 21.3% annual drop in repayments on redemption, or those who are making a final payment on their mortgage.

However, Octane Capital also estimates that there will be a jump in both ‘other lump sum’ payments, as well as ‘regular’ repayments.

The analysis shows that regular remortgage repayments are expected to climb 5.4% come the end of the year to hit £60.7bn in 2023. At the same time, other lump payments, extra payments made to reduce both a mortgage balance and the interest owed, are forecast to increase by a notable 13.6% – totalling £26.4bn.

These spikes are expected as a result of higher interest rates which have pushed up the cost of borrowing in recent years, causing borrowers to dig deeper and use their disposable income to increase their mortgage repayments in order to bring down their mortgage.

Octane Capital chief executive Jonathan Samuels comments:  “Although overall mortgage repayments may be forecast to fall this year, this top line reduction certainly masks the changing face of the sector following fourteen consecutive interest rate hikes”.

He adds: While repayments on redemption are expected to fall, regular repayments are expected to climb, highlighting the higher monthly cost facing many homeowners when it comes to repaying their mortgage.

“We also expect that there will be a far more noticeable spike in lump sum repayments, as those who have the ability to, look to reduce their outstanding mortgage as swiftly as possible while rates remain high.”