A new first-time buyer study from Rightmove reveals that the average first-time buyer mortgage payment has risen by 61% since the last election year of 2019.
Over the last five years, the average mortgage payment for a typical first-time buyer home has risen from £667 per month to £1,075 per month, as average mortgage rates have risen and remained elevated.
The increase in average mortgage payments for first-time buyers has 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 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.
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, comments: “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 reduce, 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.”
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Some kind of Help to Buy scheme for second hand houses would bring the greatest overall benefits and tax revenue. Enabling FTBs to buy traditional, existing FTB properties in locations that are convenient for their lives (close to work, family and amenity) would give them homeownership at the lowest possible cost and enable chains of home movers to form.
Just think how much SDLT and VAT would be raked in on all those transactions. HTB on new builds is fairly pointless. It's one sale of an overpriced house miles from where most people would find convenient. There's no SDLT and no chain created.
Longer mortgages are a very sensible option in the early years of homeownership. Most will allow 10% a year overpayment if finances allow but if they don't that's fine. Opting for uncomfortably high payments over a shorter term is a good way to stuff up your credit rating if unexpected expenses or pay cuts occur. The term can always be cut later after a few pay rises or interest rate cuts have happened.
The original help to buy scheme was simply a way for the big developers to make even more money 💴 🤷♂️. It damaged the industry and led to multi million pound bonuses for the CEO’s. Every time the government get involved in housing….. 😱😱
And just watch after the election where Gove pops up..
Richard, in the labour party I expect
Richard - He is very critical of the Tories at the moment so he could be angling for a seat in the Labour Party.
Jo, that won’t work you make far too much sense, then they’ll have individual proper homes most probably with gardens. We will get the EPC man to block that, you must buy Shipping Containers model type in the Sky with no garden only 3m2 platform in the Sky to make money for the subsidised Big Developers.
FTB’s buying new build are being roundly ripped off. Allowing the purchase of existing resale stock would quickly level the playing field including the inflated prices of new build, which is probably why Gov have not already done it! The corporate ‘developer lobby’ had the Con’s in their pocket. Be interesting to see what Labour may do.
They'll likely have labour in their pockets as well
AJR - It will be interesting to see how Labour deal with the Build to Rent Corporate landlords!
AJR. I seen your comment some where about governments secret Rogue Landlords Register. I wondered why they are keeping quiet about it if it’s only around 100 in 2.4m that’s one in 24’000, that’s Snow White where are all those rogues the media keeps on about.
Michael: I read about the Gov’s Rogue LL register on the Guild of Residential Landlords site a year or so ago.
Gov don’t want to release the facts ( otherwise known as ‘the truth’ in this case!) because it would undermine their anti landlord assault, undermine claims made by anti landlord groups/charities to whom they have politically aligned , and most of all would be ‘ awkward ‘ with the holly grail ‘ the tenant vote’.
My renters tell me the biggest barrier is saving up the deposit, not the monthly cost of the mortgage. Problem is they are not prepared to make the sort of economies that would allow them to save up. The only ones so far who bought their own place had an inheritance when a parent died, and professionals in shared houses who had good jobs and cheap living costs.
Hasn't that always been the case? Don't a very significant percentage of FTBs only buy because they suddenly receive a big lump of money from somewhere? Maybe an inheritance, a gambling win, injury compensation, life insurance payout on the death of their partner or because someone else has given them a sizable chunk of the deposit?
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