Average first-time buyer mortgage payments are £350 a month higher than five years ago, according to research by property website Rightmove, despite mortgage rates starting to ease.
A typical first-time buyer currently pays £940 a month for their mortgage, almost double the average £590 paid in 2020. However, this is still lower than the £1,095 peak in July 2023. These figures are based on a home with two or fewer bedrooms and assumes that the mortgage has been arranged over a 30-year term.
First-time buyers not only have to contend with steeper mortgage costs but will also face higher stamp duty bills from April, when thresholds change. First-time buyers will face a stamp duty bill of £6,250 when purchasing a property costing £425,000, compared to having to pay nothing prior to April.
Matt Smith says: “Higher mortgage rates mean home-movers need to consider how much they can afford to pay each month on a monthly mortgage, even if they can meet the asking price of a home. Another measure of affordability which is restricting some first-time buyers from getting onto the ladder is how much they can borrow.
“It’s encouraging to see that the regulator is considering how they may be able to enable first-time buyers to borrow more in a responsible way, as we think this will help to unlock more opportunity, particularly for those with smaller deposits.”
The Financial Conduct Authority (FCA) has acknowledged that current interest rate stress tests "may be unduly restricting access to otherwise affordable mortgages.” It plans to launch a call for evidence on current and alternative approaches to stress testing, as well as looking into how smart data can be used to enhance mortgage products and services.
Nikhil Rathi, chief executive of the FCA, said: “We are taking swift action to support people in getting the keys to their own home. Firms have the flexibility to help more people become homeowners and we want them to use it.
“There is more to be done, and we will be delivering further proposals quickly to support home ownership and the wider UK economy.”
According to Rightmove, the cheapest areas to buy are Kilmarnock in Ayrshire, Scotland, where the average asking price for a typical first-time buyer home is just over £84,000. This is followed by Greenock in Inverclyde with an average asking price of £88,862, and Grimsby in Lincolnshire, where the average asking price for a first-time buyer home is £93,427.
