Stability is Returning to a Previously Unsettled Market

The average monthly mortgage repayment has dropped by hundreds of pounds since October 2022, suggesting stability is returning to a previously unsettled market.

In September 2022, Liz Truss and Kwasi Kwarteng announced their disastrous mini-budget.

The immediate impact of this was economic turmoil. A string of subsequent interest rate rises pushed the cost of borrowing up and thus made life much more expensive for mortgage-paying homeowners.

In August 2022, just before the mini-budget, a typical 2-year fixed-rate mortgage at 75% LTV with a 25% deposit and an interest rate of 3.6%, resulted in an average monthly mortgage repayment of £1,113.

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.

However, the negative impacts of the mini-budget didn’t last long and by the end of the last year, stability was starting to return.

This has continued into January 2023 to the extent that 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.

It’s even better news for those looking to buy with an interest-only mortgage.

Between August and October of last year, the cost of the average interest only mortgage repayment climbed by 68.2%.

This has since dropped by -24.5% between October 2022 and today.

Jonathan Samuels, CEO of Octane Capital, the specialist property lending experts responsible for the market analysis, commented:

“The disastrous mini-budget, and the Trussenomics it was based upon, 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.”

Table shows the change in monthly mortgage rates and repayments between August 22 and January 23 based on a standard 2-year fixed-rate mortgage at 75% LTV
Period	Average house price	Average deposit at 25%	Mortgage loan required	Rate	Full payment per month £	Interest only payment per month £
August 2022	£293,250	£73,313	£219,938	3.60%	£1,113	£660
October 2022	£295,864	£73,966	£221,898	6.00%	£1,430	£1,109
January 2023 est	£292,570	£73,143	£219,428	4.58%	£1,230	£837

Change £ – Aug 2022 vs Oct 2022	£2,614	£653	£1,960	–	£317	£450
Change % – Aug 2022 vs Oct 2022	0.9%	0.9%	0.9%	–	28.5%	68.2%

Change £ – Oct 2022 vs Jan 2023	-£3,294	-£823	-£2,470	–	-£200	-£272
Change % – Oct 2022 vs Jan 2023	-1.1%	-1.1%	-1.1%	–	-14.0%	-24.5%