Due to a new record average asking price and higher mortgage rates, first-time buyers are now paying approximately £200 more per month for their mortgage than they were a year ago, according to Rightmove data.
According to the property moving website, first-time homebuyers in May paying an average of £1,056 a month for a two-bedroom home with a 25-year mortgage, up from £865 last year and a 22% increase.
However, it also notes that this is “significantly lower” than the average monthly payment of £1,218 that FTBs would have made at the height of the rate increase in October, just weeks after a tax-cutting mini-Budget alarmed the markets and drove up lending rates.
According to the survey, the average rate for a five-year fixed mortgage with a 15% down payment this week is 4.44%, up from 2.76% at this time last year but down from an average of 5.89% in October.
According to the article, first-time buyers (“FTBs”) “are still doing all they can to get aboard the ladder despite economic concerns” with first-stepper home prices hitting a new record of £224,963.”
The research also states that buyer demand in the FTB sector is the strongest compared to pre-pandemic levels and is 11% higher than the previous more typical market in 2019.
The statement reads: “FTBs have determined that average mortgage rates are becoming more stable, with a frantic rental market serving as a key driver for this conclusion.”
The average monthly asking rent for an FTB-type property is currently £1,120, an increase of 11% over the previous year.
The average borrower across the market, purchasing a home at the current average asking price of £366,247 with a five-year fix and a 15% deposit mortgage, would now pay £1,720 a month “as mortgage rates settle,” the research notes.
This contrasts with top monthly incomes of $2,012 in October of last year and $1,792 in January.
“Our data indicates that FTBs 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,” says Matt Smith, an expert on mortgages at Rightmove.
“It was understandable that some buyers, particularly FTBs, backed off in the immediate wake of the mini-Budget as mortgage rates quickly increased.
“Those who are interested in purchasing today might discover that the average monthly mortgage payment on the house they like to purchase is much lower than it may have been at the time of the rate peak in October.
Would-be buyers considering a relocation may need to evaluate their unique circumstances and compare their affordability based on current rates with the possible expense of waiting or continuing to pay rent in the interim.