First-Time UK Buyers Have Seen Increase in Mortgage Costs Since Last Year 

Picture of Written by: Liez Comendador
Written by: Liez Comendador
First-Time UK Buyers Have Seen Increase in Mortage Costs Since Last Year

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Recent data from Rightmove shows that new first-time buyers in the UK are paying nearly £200 more per month on their mortgages than they did a year ago due to higher home loan rates and record asking prices for properties. This indicates challenging conditions for those trying to enter the housing market, as house prices continue to rise and average rents hit new highs.

The average monthly payment for a new first-time buyer with a 15% deposit is now £1,056, compared to £865 a year ago. This increase is based on the average asking price for properties popular with first-time buyers, combined with the average rate for a five-year fix, 85% loan-to-value mortgage spread over 25 years.

Although new fixed-rate deals had been increasing in price since interest rates began to rise over a year ago, lenders have been gradually reducing the cost of their new fixed rates, with the average new two-year fixed rate standing at 5.28% on Thursday and the average new five-year fix at 4.97%.

Increase in Mortage Costs

Nonetheless, there are some attractive deals available for those who qualify, with a few five-year fixed-rate mortgages on sale this week starting with a rate in the three-percent range. This week has provided indications that the housing market may be defying predictions of a significant downturn.

According to Nationwide building society, UK house prices increased by 0.5% in April after seven months of declines, implying that there are “tentative signs of a recovery.” Some analysts have even suggested that the property market correction in Britain is now over.

Furthermore, it was revealed on Thursday that UK mortgage approvals increased in March to their highest level since the aftermath of the disastrous mini budget. Rightmove’s analysis was based on what it referred to as the average rate for a 15% deposit five-year fixed-rate mortgage: 4.44%. This is down from an average of 5.89% in October but up from 2.76% a year ago.

According to property website Rightmove, the monthly cost of a mortgage for new first-time buyers has increased to £1,056, which is considerably lower than the peak of £1,218 in October when mortgage rates reached their highest.

Despite the challenging conditions, prospective first-time buyers remain determined to climb the property ladder. Demand in the first-time buyer sector is currently 11% higher than it was in 2019, with the highly competitive rental market being one of the driving forces behind this determination.

References

Mortgages for new UK first-time buyers up ‘nearly £200 a month’ on a year ago. (5 May 2023). Retrieved from The Guardian: https://www.theguardian.com/uk-news/2023/may/05/mortgages-for-new-uk-first-time-buyers-up-nearly-200-a-month-on-a-year-ago

Mortgages Update: First-Time Buyers Face Steep Rise In Mortgage Costs. (5 May 2023). Retrieved from Forbes: https://www.forbes.com/uk/advisor/mortgages/2023/05/05/mortgage-updates/

Author

  • Darren Menzies

    Darren is a Qualified Accountant with a firm belief in integrated teamwork. Darren has leveraging expertise in bookkeeping and business development along with cultural understanding to deliver exceptional and tailored services in accounting, as well as tax, financial advisory and consulting.

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