The average cost of a first-time buyer’s mortgage payments has surged by more than £400 a month during the last five years. The figure represents a rise of 61 percent which has massively outpaced rises in wages over the same period.
The simple stats, published by Rightmove, show the monthly figure has leapt from an average of £667 per month to some £1,075.
The biggest spike came during 2022 after the Bank of England increased interest rates to battle high inflation and the mortgages on offer became more expensive.
Mortgage rates have remained elevated ever since with the Bank of England rejecting repeated pleas for reduction in the base rate from the current 16 year high of 5.25 percent.
The average five-year fixed mortgage rate for someone buying with a 20 percent deposit is now 5.09 per cent, compared to 2.24 percent in 2019, according to UK Finance data. Meanwhile, the average first-time buyer home now costs £227,757, which is up 19 percent since 2019.
Over the same five-year period, average wages are up by 27 percent compared to 61 per cent increase in mortgage costs.
Rightmove found that 16 out of the 20 areas that have seen the biggest jump in first-time buyer prices are located in the North West and Wales, though Bolsover in Derbyshire tops the list having seen a 55 per cent rise in average asking prices.
Tim Bannister, a property expert at Rightmove is urging the Bank of England to cut rates to ease the pressure on first-time buyers.
He argues this will have an almost immediate benefit for those trying to get onto the ladder, should it as expected lead to lower mortgage rates.
He added: “As rates have increased over the last five years, the amount that a typical first-time buyer is paying each month on a mortgage has outstripped the pace of earning growth.
“Some first-time buyers are looking at extending their mortgage terms to 30 or 35 years to lower monthly payments, or looking at cheaper homes for sale so that they need to borrow less.
“If mortgage rates reduce, this will help first-time buyers in the short term more so than election housing promises.”
Mr Bannister would also like to see the next government prioritise long-term solutions to help more first-time buyers onto the ladder, over short-term policies that only help very small groups of people.
He said: “We hope that the next government can support first-time buyers with well-thought out policies, which address the difficulties of saving up a large enough deposit and being able to borrow enough from a lender.’
Nathan Emerson, chief executive of Propertymark, a membership body representing firms across the property industry, agreed.
He said: “Surging interest rates and inflation over the last few years have impacted the housing market with force,’ said Emerson.
“With the next general election now under two weeks away we are keen to see targeted support for first time buyers at the first opportunity from any incoming government.
“The potential of homeownership should never be a prospect that is ever out of reach for people.”
