"Mortgage rates, while improved from the peak, are still high against recent norms. This has led to first-time buyers taking out longer terms, waiting longer to build up their deposit, and looking at cheaper areas to get onto the ladder"
- Tim Bannister - Rightmove
Ahead of the Autumn Budget, the latest mortgage data released by Rightmove has revealed average first-time buyer mortgage payments are still over £350 more than five years ago.
Data from Rightmove’s weekly mortgage tracker shows that the average monthly mortgage payment for a typical first-time buyer is now £931, compared with £578 in 2019, a difference of £353. However, this is still more than £150 cheaper than the peak in July 2023.
The calculations are based on a first-time buyer being able to put down a deposit of 20% and spreading the cost of the mortgage over 30 years, on a home which has two bedrooms or fewer.
The average 5-year fixed mortgage rate for someone with a 20% deposit is now 4.58%, compared with 2.13% in 2019, which has resulted in mortgage payments which are 61% higher than five years ago on average.
Meanwhile, a typical first-time buyer home in Great Britain of two bedrooms or fewer is now £227,570, compared with £192,221 in 2019, an increase of 18% by comparison.
First-time buyers are waiting longer to buy a home and spreading the cost of their mortgage out for longer. The average age of a first-time buyer is now 33 compared with 32 in 2019, while the average mortgage term for a first-time buyer is now 31 years, compared with 29 years in 2019, based on UK Finance data.
Rightmove’s regional analysis highlights how first-time buyers in different areas of Great Britain are being stretched.
In London, a typical starter home is now nearly five times the average annual salary of two people, the most of any region. This means that many first-time buyers may struggle to borrow enough to afford the home that they want, with lenders typically able to loan up to 4.5 times a combined income. Those looking to purchase on their own would find it even more difficult.
In the North West, the average monthly mortgage payment is up by 75% compared with five years ago, and the average asking price for a home is up by 29% over the same period, the highest increase of any region.
In Yorkshire & The Humber, the average monthly mortgage payment is up by 74% compared with five years ago, while the average wage in the region is up by 25% - the biggest gap in wage growth and average mortgage payment increase across Great Britain over the last five years.
The current affordability criteria set by the financial regulators include a typical borrowing cap of 4.5 times a combined income and a stressed rate test at around 9.0%. This is to ensure that movers don’t overstretch themselves and can still afford their mortgage payments if their circumstances change.
Lenders have their own policies within this regulatory framework, and positive steps have been made to look at how first-time buyer affordability can be improved. Rightmove suggests a wider review of mortgage affordability criteria could help to unlock greater first-time buyer affordability at scale responsibly.
Matt Smith, Rightmove’s mortgage expert says: “Market regulation has had its intended impact to help prevent people from overstretching themselves when taking out a mortgage. It also means that there are many people out there, particularly first-time buyers, who find themselves priced out of the home that they want because they can’t borrow enough or pass the stress rate test. As our regional analysis shows, there are several hurdles for first-time buyers to clear, made more difficult with higher mortgage rates, and payments outpacing wage growth.
“Lenders, both new entrants to the market and major lenders, have looked at how they can work within the existing framework to provide more support to first-time buyers which has been really encouraging to see. We think there is the opportunity for the government to help unlock greater long-term affordability in a responsible way through a wider review of affordability criteria alongside the regulators and lenders.”
Tim Bannister, Rightmove’s property expert adds: “The improving market conditions compared with last year have led to a recovery in activity in the typical first-time buyer sector. We’re seeing more choice in this sector for would-be first-time buyers, and more potential buyers contacting agents versus last year.
"However, mortgage rates, while improved from the peak, are still high against recent norms. This has led to first-time buyers taking out longer terms, waiting longer to build up their deposit, and looking at cheaper areas to get onto the ladder. First-time buyer affordability remains stretched and any support that can help more to get onto the ladder would be welcome.”
