First time buyers are paying £2,400 more a year on mortgages compared to a year ago thanks to higher interest rates, says Rightmove
- The average rate for a five-year fixed mortgage deal is now 4.44%
- First-time buyer demand is still strong, however – up 11% from 2019
- Average asking price for a first-time buyer type property is now £224,963
First-time buyers are paying £200 more a month for their mortgage on average than this time last year, data from Rightmove shows.
Mortgage costs for a new homeowner with a 15 per cent deposit mortgage are now £1,056 per month, compared with £865 a year ago.
The average rate for a five-year fixed, 15 per cent deposit mortgage is now 4.44 per cent, down from an average of 5.89 per cent in October.
First-time buyers face higher mortgage costs compared to a year ago after the price of borrowing soared
However, it is up significantly from a year ago when it was 2.76 per cent.
First time buyers face a double financial hit, as house prices have remained high despite the rise in mortgage rates. The average asking price for a first-time buyer type property is now at a new record level of £224,963.
House prices are at their most expensive for 147 according to Schroders relative to earnings, with a typical property now costing nine times average wages. In London the average home now costs twelve times the average wage.
House prices have risen from around four-times average earnings in the mid-1990s to where they are today.
Yet despite these challenges first time buyer demand for homes remains high. Demand from those trying to get on to the property ladder is currently 11 per cent above where it was in 2019 – the last full year of data pre-Covid.
Rightmove’s Matt Smith said: ‘Our data indicates that first-time buyers who are able to raise their deposit are still finding buying compelling, with the number of people looking to move in this sector currently higher than the last more normal market of 2019.
‘It was understandable that some buyers took a step back in the immediate aftermath of the mini-Budget, particularly first-time buyers, as mortgage rates rapidly rose.
‘Now that rates are settling, would-be buyers planning a move may need to assess their individual circumstances and weigh up their affordability based on current rates, with the potential cost of waiting or paying rent for longer.’
Although Help to Buy ended last year, it has been reported the Government is considering introducing a similar scheme to help buyers get on to the property ladder.
Separately, Skipton Building Society is launching a product that will ‘enable people trapped in rental cycles – where they’re prevented from being able to save for a house deposit – to access the property ladder and make a home’, according to chief executive Stuart Haire.
It is thought the product will be some form of 100 per cent mortgage, although the full details are yet to be announced.
Higher rents remain a significant issue for those trying to save for their first home. There are just five pockets of Britain where asking rents for tenants have dropped over the past year, according to data from Rightmove.
Rents rose 9.4 per cent over the past 12 months on average, as the buy-to-let market contends with inflation and rising interest rates. It means new tenants are paying just over £100 more per month than this time last year.
