New first-time buyers are typically paying nearly £200 a month more on their mortgage than a year ago because of a combination of higher home loan rates and record asking prices for properties, new data shows.
The figures from property website Rightmove underline the challenging conditions facing those hoping to get on to the UK housing ladder, with separate figures this week indicating that house prices have resumed their upwards march at the same time that average rents are hitting fresh highs.
Rightmove said a typical new first-time buyer who was able to stump up a 15% deposit was now paying £1,056 a month, compared with the £865 the same individual would have paid a year ago – an extra £191 a month.
This is based on the average asking price for properties popular with first-time buyers, ie those with one or two bedrooms – which has climbed to a record level of £224,963 – combined with the average rate for a five-year fix, 85% loan-to-value mortgage spread over 25 years.
New fixed-rate deals had already started getting more expensive after interest rates began their upwards journey more than a year ago, but leapt up in the wake of last autumn’s disastrous mini-budget.
Since then, lenders have been gradually reducing the cost of their new fixed rates. The average new two-year fixed rate stood at 5.28% on Thursday, according to Moneyfactscompare.co.uk. The average new five-year fix stood at 4.97% at the start of this month but was 5% on Thursday.
However, there are best-buy deals available that are cheaper than that, for those who meet the criteria: this week, a number of five-year fixes were on sale with rates starting with a three.
This week brought evidence that the housing market may be continuing to defy those who had predicted a sharp downturn. On Tuesday, Nationwide building society said UK house prices rose by 0.5% in April after seven months of declines, suggesting there were “tentative signs of a recovery”. Some commentators have gone as far as to claim that Britain’s property market correction is already over.
It emerged on Thursday that UK mortgage approvals had risen in March to their highest since the aftermath of the mini-budget chaos.
Rightmove’s analysis was based on what it said was the average rate for a five-year, fixed-rate, 15% deposit mortgage: 4.44%. This is down from an average of 5.89% in October, but up from 2.76% this time last year.
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It said that, to put its data into context, the figure of £1,056 a month was significantly lower than the £1,218 a month that a new first-time buyer would have paid on average when mortgage rates climbed to their peak in October.
The website said that, despite the difficult conditions, determined would-be first-time buyers appeared to still be doing all they could to get on to the ladder. Demand in the first-time buyer sector was currently 11% higher than in 2019. A “frenetic” private rental market was one of the key drivers for this determination from first-time buyers.
