Research shows plans could save homeowners over £170 a month
The latest mortgage market analysis reveals that, with homeowners paying increasingly expensive mortgage repayments, Jeremy Hunt’s proposed idea of stretchy mortgages could save them £171 per month.
The analysis, conducted by Octane Capital, suggests average mortgage repayments could reduce from £1,346 to £1,175 if the chancellor of the exchequer’s “stretchy mortgages”, which would increase mortgage repayment periods from 25 to 35 years, was to be introduced.
The plans are in response to the current economic turbulence in the UK which is causing some concern for homeowners who are seeing their monthly mortgage repayments get increasingly expensive. The current average UK house price sits at £294,559. With an average deposit of 25% (£73,640), this means buyers are taking out standard variable rate mortgages to the tune of £220,919. With an average mortgage rate of 5.42% paid over 25 years, the average monthly mortgage repayment is now £1,346, or £998 for interest only payments.
For many UK homeowners there is a risk that increasing mortgage costs, amidst wider cost of living and energy price increases, could lead to missed payments and a greater risk of repossessions in the coming year. In addition to this, there growing fears the Bank of England (BoE) could raise rates to 5%, which would cause the average mortgage rate to rise to 6.95%. If this is coupled by what Lloyds Bank predicts will be a -7.9% decrease in house prices in 2023 – the average monthly mortgage repayment will be £1,432.
CEO of Octane Capital, Jonathan Samuels, commented:
“There are many homeowners across the UK who are feeling the strain of rising mortgage costs this Christmas, and while we wait patiently for economic improvement in 2023 it might be a wise move to try and protect against the risks of missed mortgage payments, and worse still, repossessions.
The Chancellor’s stretchy mortgage suggestion has the potential to provide some temporary relief for struggling homeowners, while affording more time for the Bank of England to get a handle on inflation, and rising interest rates, which are currently being pushed up by wider economic uncertainty and energy costs.”
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