Financial Pressure Mounts for First-Time Buyers

Financial Pressure Mounts for First-Time Buyers

New data reveals that first-time buyers in the UK face increased monthly mortgage payments, amounting to nearly £200 more compared to a year ago. The combination of higher home loan rates and record asking prices for properties has contributed to these challenging conditions for aspiring homeowners.

This comes when house prices have resumed their upward trajectory while average rents have reached new highs.

According to property website Rightmove, a typical new first-time buyer with a 15% deposit is now paying £1,056 per month, compared to the £865 paid by the same individual a year ago – representing an additional £191 each month. These calculations are based on the average asking price for properties popular among first-time buyers (typically one or two bedrooms), which has reached a record level of £224,963. The figures also consider the average rate for a five-year fixed, 85% loan-to-value mortgage spread over 25 years.

The cost of fixed-rate mortgage deals had increased following a rise in interest rates over a year ago. Still, the situation worsened after last autumn’s turbulent mini-budget.

However, lenders have gradually reduced the cost of their new fixed rates since then. As of Thursday, the average new two-year fixed rate stood at 5.28%, while the average new five-year fix was 5%, down from 4.97% at the start of the month.

Although best-buy deals are available with lower rates for those who meet the criteria, it is worth noting that the overall trend shows an increase in mortgage costs for first-time buyers.

Recent indications suggest that the housing market may be defying predictions of a sharp downturn, with Nationwide building society reporting a 0.5% rise in UK house prices in April after seven months of declines. Some experts even suggest that the property market correction in Britain may have already come to an end.

Rightmove’s analysis is based on the average rate for a five-year fixed-rate mortgage with a 15% deposit, which currently stands at 4.44%. While this is lower than the peak of 5.89% in October, it is significantly higher than the rate of 2.76% observed at this time last year.

It’s essential to provide this context, as the figure of £1,056 per month is still considerably lower than the average of £1,218 per month paid by new first-time buyers when mortgage rates reached their highest point in October.

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