First-time buyers are paying almost £200 more a month on their mortgage than a year ago, due to a new record average asking price and higher mortgage rates, data from Rightmove shows.
First-steppers with a 15% deposit in May are paying an average of £1,056 a month for a two-bedroom home with a 25-year mortgage, compared with £865 last year, a 22% rise, says the property moving website.
But it adds that this is “significantly lower” than the £1,218 a month FTBs would have paid on average at the peak of the rate hike in October, weeks after tax-cutting mini-Budget spooked markets and lifted lending prices.
The average rate for a five-year fixed, 15% deposit mortgage this week is 4.44%, down from an average of 5.89% in October, but up from 2.76% this time last year, the study finds.
It says that FTBs “are still doing all they can to get onto the ladder despite economic challenges” and first-stepper home prices hitting a fresh record of £224,963.
Buyer demand in the FTB sector is 11% higher than the last more normal market in 2019 and is holding up most strongly against pre-pandemic levels, the report adds.
It says: “Average mortgage rates are becoming more stable, and a frenetic rental market is a key driver for this determination from FTBs.”
The average asking rent for an FTB-type property is now £1,120 a calendar month, an 11% increase compared with last year.
Across the wider market, the average borrower buying a property at the current average asking price of £366,247, with a five-year fix and a 15% deposit mortgage, would now pay £1,720 a month “as mortgage rates settle,” the report points out.
This compares to £2,012 per month at the peak last October, and £1,792 per month in January.
Rightmove mortgage expert Matt Smith says: “Our data indicates that FTBs who are able to raise their deposit are still finding buying compelling, with the number of people looking to move in this sector currently higher than the last more normal market of 2019.
“It was understandable that some buyers took a step back in the immediate aftermath of the mini-Budget, particularly FTBs, as mortgage rates rapidly rose.
“Those looking to buy now may find that the average monthly mortgage payment on the home they are looking to buy is significantly less than they may have paid at the peak of rates in October.
“Now that rates are settling, would-be buyers planning a move may need to assess their individual circumstances and weigh up their affordability based on current rates, with the potential cost of waiting or paying rent for longer.”
