Monthly payments for average homebuyers coming to the end of their deals could rise by up to £300 a month, said Octane Capital.

New buyers looking for a three-year fixed term at 75% loan to value (LTV) can expect an average monthly repayment of £1,125, based on the current average mortgage rate of 3.74% and an average house price of £219,089.

According to the specialist lender, recent turmoil in the mortgage market led to products being pulled and mortgage rates are now forecast to rise to as high as 6%. It added that some analysts had predicted house price growth could stall or decline by as much as 5%.

If the average mortgage rate climbs to 6% in 2023, and house prices fall by 5%, a new buyer’s monthly repayment could increase to £1,341, which is a £216 uplift.

Additionally, if house prices remain the same, but the average mortgage rate rises to 6%, then monthly mortgage payments for a new buyer could increase to £1,412, which is £286 higher than current levels.

‘Substantial difference’ in monthly payments

Octane Capital said for existing homeowners coming to the end of a three-year fixed rate term, they could see a “substantial difference” in their monthly payments.

In 2019, the average rate for a three-year fixed rate at 75% LTV was 1.73%, bringing monthly mortgage payments to around £719. This is based on the average house price of £233,366 at the time.

Those coming to the end of their deal in 2022 would have cleared around £17,000 on the sum owed on their mortgage.

However, the average current rate for a three-year fixed rate is 3.74%, so payments would be £91 more at £810 per month.

Those coming to the end of their deal in 2023 could see monthly payments rise to £1,043, which is a £291 increase on prior monthly costs.

‘Unsettled landscape’ set to continue

Octane Capital’s CEO Jonathan Samuels said that it had been a “very chaotic few weeks” in the mortgage market and the “unsettled landscape” could remain as further interest rate rises look likely.

He said: “Those looking to lock in a three-year fixed term today will be facing considerably higher repayment rates compared to three years ago, with the average repayment now over £400 more per month.

“Despite this, those considering a purchase are best advised to do so now, as sitting on the fence could see you paying between £200 and £300 more a month come next year, with mortgage rates forecast to hit 6%.”

He added: “For those approaching the end of their three-year fixed term, now is also the time to lock in a fresh deal. Currently doing so will see you pay around £90 more a month but this cost is set to climb to almost £300 more per month for those due to renew next year.”