First time buyers are paying £2,400 more annually for a mortgage compared to a year ago
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.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.
This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value
What if I need to remortgage?
Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate.
Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal.
Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to higher mortgage rates limiting people’s borrowing ability.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.
You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.
> Check the best fixed rate mortgages you could apply for