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Mortgage holders could benefit from rising property prices as an average sale made £74,000 in 2023

Rising property prices mean homeowners who sold in 2023 made an average profit of £74,000. Gains could help you move up the property ladder, but they could also be useful even if you don’t move and might lead to lower mortgage repayments. Read on to find out if you could benefit from rising property prices.

Just 1 in 10 homes sold in 2023 made a loss

Despite concerns that property prices would fall or stagnate due to the Bank of England increasing its base interest rate, which affects the cost of borrowing, data indicates that homeowners are benefiting from long-term growth.

Indeed, according to Zoopla, the average homeowner who sold their property in 2023 did so after being in their home for nine years and made a sizeable profit of £74,000. London homeowners saw the biggest gains at £137,000, while those selling a bungalow or detached home made over £100,000 on average.

Only 1 in 10 properties sold in 2023 had fallen in value, with an average loss of £17,000.

So, if you’re searching for a new home this year, you might discover your budget is larger than you expect. Having your property valued now could help you calculate your mortgage needs and the budget for your next home.

Rising property prices could cut your outgoings when you remortgage

You don’t have to wait until you’re ready to sell your home to benefit from rising property prices – if the value of your home has increased it could help you secure a more competitive interest rate on your mortgage.

Lenders will calculate how the value of your home compares to your mortgage, known as the “loan-to-value” (LTV) ratio, when reviewing your application.

If you purchased a home for £200,000 with a 10% deposit, your LTV would be 90%. If the value of your property then increased to £220,000, your LTV would fall to around 82% because your mortgage relative to the value of your home has decreased.

Of course, if you’ve chosen a repayment mortgage, your repayments will also lower your LTV as the amount you owe falls.

Usually, the lower your LTV, the more competitive the interest rate you’ll be offered as you pose less of a risk. So, making mortgage repayments and rising property prices could lead to lower repayments in the future.

Accessing a lower interest rate could save you thousands of pounds over the mortgage term

Over the last few years, the Bank of England has increased its base interest rate to tackle inflation. As of March 2024, the base rate was 5.25%, compared to 0.25% at the start of 2022. As a result, many homeowners have seen their mortgage repayments rise sharply.

Securing a competitive interest rate could help offset some of the previous increases you might have experienced. Even a seemingly small difference in interest rate could have a large effect on your finances, especially when you calculate the savings over the full mortgage term.

Let’s say you have borrowed £150,000 through a repayment mortgage with a 15-year term, if the interest rate is:

  • 4% your monthly repayment would be £1,109
  • 5% your monthly repayment would be £1,126.

The total interest you’d pay over the 15-year mortgage term with a 4% interest rate is around £20,000 less than you’d pay if the rate was 5.5%.

So, if your mortgage deal has expired or will do so soon, getting your home revalued might be a useful step – it could lead to lower regular outgoings and really add up over the long term.

You can usually lock in a new mortgage deal up to six months before your current mortgage deal expires. Being proactive and finding a new mortgage before your existing one ends could mean you avoid paying your lender’s standard variable rate (SVR), which is often not competitive.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.


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