Specialist lender Octane Capital has estimated that, while total repayments will fall in 2023, there will be a jump in regular and lump sum mortgage payments made.
The analysis cited increasing interest rates and the high cost of borrowing as factors pushing borrowers to overpay on instalments and bring down their mortgage.
Octane Capital analysed historical mortgage repayment data, and found that the total sum pain on a monthly basis hit £254.4bn last year, a 7% increase versus the previous year, and further positive movement on the 19% increase during the pandemic boom period of 2020 and 2021.
However, this year to June, total mortgage repayments fell at an average rate of -1.2% per month, to £18.9bn in June versus £21.4bn at the start of the year.
Octane Capital estimated that by the end of the year, the total sum of mortgage repayments made in 2023 could sit 12.1% below that of 2022, totalling £223.7bn.
This decline would be driven by an estimated 21.3% annual drop in repayments on redemption, or those who are making a final payment on their mortgage.
However, Octane Capital also predicted a jump in both ‘other lump sum’ payments and ‘regular’ repayments.
The analysis showed that regular remortgage repayments were expected to climb 5.4% come the end of the year to hit £60.7bn in 2023.
Other lump payments, extra payments made to reduce both a mortgage balance and the interest owed, were forecast to increase by 13.6% – totalling £26.4bn.
Jonathan Samuels, CEO of Octane Capital, said: “Although overall mortgage repayments may be forecast to fall this year, this top line reduction certainly masks the changing face of the sector following fourteen consecutive interest rate hikes.
“While repayments on redemption are expected to fall, regular repayments are expected to climb, highlighting the higher monthly cost facing many homeowners when it comes to repaying their mortgage.
“We also expect that there will be a far more noticeable spike in lump sum repayments, as those who have the ability to, look to reduce their outstanding mortgage as swiftly as possible while rates remain high.”
