"The combination of a new record price and higher mortgage rates than last year means it is a challenge for first-time buyers"
Newly released data from Rightmove shows that when broken down to monthly totals, first-time buyers with a 15% deposit now pay £1,056 per month compared with £865 last year. However, this is significantly lower than the £1,218 per month that a new first-time buyer would have paid on average at the peak of rates in October, a comparable saving of nearly £200 per month.
The analysis is based on the average asking price for a typical first-time buyer-type property (2 bedrooms and fewer properties) and the average rate for a five-year fixed, 85% Loan-To-Value mortgage spread over 25 years. The average rate for a five-year fixed, 15% deposit mortgage is now 4.44%, down from an average of 5.89% in October, but up from 2.76% this time last year.
Meanwhile, the average asking price for a first-time buyer-type property is now a new record of £224,963.
However, the signs are that determined first-time buyers are still doing all they can to get onto the ladder despite economic challenges. Buyer demand in the first-time buyer sector is currently 11% higher than the last more normal market of 2019 and is holding up most strongly against pre-pandemic levels.
Average mortgage rates becoming more stable, and a frenetic rental market are key drivers for this determination from first-time buyers. The average asking rent for a first-time buyer-type property is now £1,120 per calendar month and has increased 11% compared with last year.
The average amount someone taking out a mortgage would expect to repay each month is now beginning to steady as mortgage rates settle.
Someone purchasing a property at the current average asking price of £366,247 with a 5-year fixed, 15% deposit mortgage would now pay £1,720 a month.
This compares to £2,012 per month at the peak in October after the mini-budget, and £1,792 per month in January.
Rightmove’s mortgage expert Matt Smith said:
“The combination of a new record price and higher mortgage rates than last year means it is a challenge for first-time buyers. 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 in 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. Those looking to buy now may find that the average monthly mortgage payment on the home they are looking to buy is significantly less than they may have paid at the peak of rates in October.
"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.”
