New buyers are paying £2,400 more a year on mortgages compared to a year ago thanks to higher interest rates, says Rightmove
- The average rate for a five-year mortgage agreement is now 4.44%
- However, demand from first-time buyers is still strong – up 11% from 2019
- The average asking price for a first-time buyer property is now £224,963
New buyers are paying an average of £200 a month more for their mortgage than at this time last year, data from Rightmove shows.
Mortgage costs for a new homeowner on a 15 percent mortgage are now £1,056 a month, compared to £865 a year ago.
The average rate for a five-year fixed mortgage with a 15 percent deposit is now 4.44 percent, compared to an average of 5.89 percent in October.
First-time buyers are faced with higher mortgage costs than a year ago, when the price of borrowing rose enormously
However, it is significantly higher than a year ago, when it was 2.76 percent.
New buyers are doubly hit financially as house prices have remained high despite the rise in mortgage rates. The average asking price for a starter home type is now at a new all-time high of £224,963.
According to Schroders, house prices are the most expensive for 147 relative to income, with an average home now costing nine times the median wage. In London, the average house now costs 12 times the average wage.
House prices have risen from about four times median income in the mid-1990s to where they are today.
Despite these challenges, demand for first-time buyers remains high. Demand from those trying to get up the real estate ladder is currently 11 percent higher than in 2019 – the last full year of data before Covid.
Rightmove’s Matt Smith said: ‘Our data indicates that new buyers who can increase their down payment still find buying attractive as the number of people looking to move in this sector is currently higher than the last more normal market of 2019.
“It was understandable that some buyers, especially first-time buyers, took a step back in the immediate aftermath of the mini-budget as mortgage rates rose rapidly.
“Now that rates have been set, prospective buyers planning a move may need to assess their individual circumstances and weigh their affordability against current rates, with the potential costs of waiting longer or paying rent.”
Although Help to Buy ended last year, it has been reported that the government is considering introducing a similar scheme to help buyers get up the property ladder.
Separately, Skipton Building Society is launching a product that will enable “people who are stuck in rental cycles – where they can’t save for a house security deposit – to access the real estate ladder and make a home,” said CEO Stuart. her.
It’s thought the product will be a form of 100 percent mortgage, though full details have yet to be announced.
Higher rents remain a major problem for those trying to save for their first home. According to data from Rightmove, there are only five parts of Britain where asking rents for tenants have fallen over the past year.
Rents have risen an average of 9.4 percent over the past 12 months as the buy-to-rent market struggles with inflation and rising interest rates. It means new tenants are paying just over £100 a month more than this time last year.