Mortgage repayments estimated to fall by 25%

As a buy-to-let landlord in the UK, you are likely using fixed-rate mortgages for your property investments. However, there’s good news on the way for property owners affected by heavily fluctuating mortgage rates.

New analysis suggests that monthly mortgage payments could fall by around 25% by the end of 2023, as stated by the wealth manager, Quilter.

How does this affect me?

A drop in mortgage costs would significantly improve the profitability of your investments, increasing cash flow and increasing your scope to reinvest finances back into your rental properties. This could be extremely valuable when considering upcoming EPC measures which are calling for expensive improvements to improve energy efficiency of all UK rental properties.

Additionally, you may be able to reconsider your mortgage repayment strategies, paying off mortgages faster by making higher monthly payments or increasing their repayment frequency.

How certain is the 25% drop?

Statistics released by the UK government's house price index have revealed that in November 2022, the average cost of a property in the UK was £294,910. Around this time, mortgage rates peaked at roughly 6%.

However, Halifax have stated that they anticipate an 8% fall in UK house prices by November 2023. “We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years” - Director of Halifax Mortgages, Kim Kinnaird Halifax predicted that mortgage rates will continue to decline, potentially hitting 4%. As a result, the average UK house price could fall to £271,317, leading to an estimated 25% decrease in monthly mortgage payments compared to the previous year.

Karen Noye, mortgage expert at Quilter stated:“Rising mortgage rates have played a significant role in the affordability of buying a first home or moving home, and for many these costs were pushed to unaffordable highs. It is therefore a real positive that looking forward we can hope to see such a significant dip in monthly mortgage payments by the end of the year should house prices and mortgage rates continue to fall as expected.”

Whilst there is hope on the horizon for the UK property market, it’s important to listen to these predictions with caution. Inflation, government intervention, the type of property and location are all factors which could affect mortgage payments. Landlords should stay cautious and up-to-date with new developments through 2023 as the market develops.

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