A new report from Octane Capital sheds light on the financial pressures looming for first-time buyers and landlords alike. With mortgage repayments set to climb significantly in 2024, the dream of homeownership and investment in property could get pricier.

For those looking to step onto the property ladder for the first time, the forecast is a stark warning. According to Octane Capital’s analysis, the annual cost of a mortgage could surge by £398. This increase is tied to the dual pressures of rising mortgage rates and a predicted 3% hike in house prices over the next year.

Currently, the average price of a home for first-time buyers stands at £236,326. However, with prices expected to rise, this could reach £243,416. Today, a typical first-time buyer needs a mortgage of £200,877, which, at the current average rate of 4.4%, means a monthly repayment of £1,105. If rates hold steady and prices rise as anticipated, this monthly figure could leap to £1,051, translating to an extra £398 over a year.

Landlords Not Spared

Landlords, too, face financial headwinds. The cost of buy-to-let mortgages is projected to rise, with a full monthly repayment increasing by £367 annually if rates and prices follow the predicted path. This calculation assumes a 3% increase in property values, pushing the average investment cost from £284,950 to £293,499.

At present, landlords can expect to pay £1,020 monthly for a full repayment mortgage or opt for an interest-only payment of £545, based on the current average rate of 3.06%. However, with the anticipated property price inflation, these figures are set to climb, potentially adding £367 to annual costs for full repayments and £196 for interest-only options.

A Surge in Market Confidence

Despite these challenges, the market is experiencing a resurgence in activity, buoyed by a freeze on interest rates and a reduction in mortgage rates. Jonathan Samuels, CEO of Octane Capital, highlights the growing market confidence and the resultant spike in buying activity, “Market confidence is growing and buyers have been encouraged by both a freeze on interest rates and a reduction in mortgage rates. This has led to a surge in activity as they look to capitalise on the lower cost of borrowing before it’s too late. Those considering a purchase this year would be wise to follow suit. In recent weeks we’ve seen signs that swap rates are starting to creep up, which indicates that mortgage rates are likely to do the same. When you also consider that house prices are expected to rise by 3% this year, the decision to sit tight could be a costly one.”