"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"
- Tim Bannister - Rightmove
The latest analysis from Rightmove has brought into sharp focus the challenges faced by first-time buyers in the UK today.
Average first-time buyer mortgage payments, according to the data, have risen by an astonishing 61% since the last election in 2019, from an average of £667 per month to £1,075 per month and have significantly outpaced wage growth. Over the same five-year period, average wages are up by 27%.
The mortgage payment calculations assume first-time buyers are taking out a five-year fixed mortgage, spread over 25 years, at 80% Loan-To-Value. An 80% LTV mortgage is the average for first-time buyers according to UK Finance data.
The average five-year fixed, 80% Loan-To-Value mortgage rate is now 5.09%, compared to 2.24% in 2019.
Meanwhile, the average first-time buyer home is now £227,757, rising by 19% since 2019, however, prices have risen more sharply in different areas. At a regional level, the North West has seen the biggest jump in first-time buyer prices at 33% above 2019, while London has seen the smallest rise of just 6% in five years.
This is reflected in local trends, with 16 out of the top 20 areas across Great Britain that have seen the biggest jump in first-time buyer prices being located in the North West and Wales, though Bolsover in the West Midlands tops the list at a 55% rise in average asking prices.
With the study highlighting how significant the increase in mortgage rates has been for first-time buyer affordability, Rightmove suggests that a Bank of England rate cut will have the most immediate benefit for those trying to get onto the ladder, should it as expected lead to lower mortgage rates.
Looking ahead
Rightmove’s key ask of the next government is that they prioritise long-term solutions and policies to help more first-time buyers onto the ladder, over short-term policies that only help very small groups of people.
Tim Bannister, Rightmove’s property expert, commented: “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 are reduced, this will help first-time buyers in the short term more so than election housing promises.
"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, CEO of Propertymark, comments: “Surging interest rates and inflation over the last few years have impacted the housing market with force.
"However, with the next general election now under two weeks away, Propertymark is 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.
"As inflation is now back within the range initially targeted, we are optimistic to see the base rate cut as soon as realistically possible, which would be very welcome news for people stepping onto the housing ladder when it does happen.”
