First-time buyers spend a whopping £4,200 a year more on their mortgages than they did five years ago, according to new research.
Property website Rightmove analysed the amount first-time buyers spend on their mortgage payments now compared to in 2019. It found that on average first-time buyers’ monthly mortgage payments cost £931, up from £578 five years ago.
It’s not all doom and gloom however, as the current £931 average monthly payment is over £150 cheaper than last year’s peak in July.
Rightmove’s examples are based on a first-time buyer putting down a 20% deposit on a property with two or less bedrooms and opting for a 30-year mortgage term. Costs have risen sharply over the past five years due to a combination of steeper mortgage rates and rising property prices.
Tim Bannister, Rightmove’s property expert said: “The improving market conditions compared with last year have led to a recovery in activity in the typical first-time buyer sector. We’re seeing more choice in this sector for would-be first-time buyers, and more potential buyers contacting agents versus last year. However, mortgage rates, while improved from the peak, are still high against recent norms.
“This has led to first-time buyers taking out longer terms, waiting longer to build up their deposit, and looking at cheaper areas to get onto the ladder. First-time buyer affordability remains stretched and any support that can help more to get on to the ladder would be welcome.”
Buyers most stretched in London
First-time buyers face the biggest affordability challenges in London, where a typical starter home costs the equivalent of nearly five times the average annual salary of two people, higher than the usual 4.5 times combined income that banks and building societies are generally prepared to lend.
Times are tough for buyers in northern regions too, with average monthly mortgage payments up by 74% compared with five years ago, while the average wage in the region is up by 25%. Similarly, the average monthly mortgage payment in the North West is up by 75% compared with 2019, and the average asking price for a property there is up by 29% over the same period, the highest increase of any region.
Rightmove said:
“Lenders, both new entrants to the market and major lenders, have looked at how they can work within the existing framework to provide more support to first-time buyers which has been really encouraging to see. We think there is the opportunity for the government to help unlock greater long-term affordability in a responsible way through a wider review of affordability criteria alongside the regulators and lenders.”
