Ahead of today’s decision by the Bank of England, Rightmove calculates that if interest rates rise [as predicted] by 0.5%, new first-time buyers would see monthly mortgage payments increase to an average of 40% of their gross salary, a level not seen since 2012.
The average monthly mortgage payment for new first-time buyers would increase to over £1,000.
Headline affordability stats:
Average monthly mortgage payments for new first-time buyers are £976 per month, compared with £813 per month in January (+20%)
If the rate rises by 0.25% the average monthly mortgage payment for new first-time buyers would increase to £1,003 nationally, and if it rises by 0.5% it would increase to £1,030
Average first-time buyer monthly mortgage payments are currently 38% of an average gross salary – a 0.25% rise in the base rate would take it to 39%, and a 0.5% rise would take it to 40%, which is a level not seen since 2012
A 10% deposit on an average first-time-buyer type home is now £22,494, which is 57% higher than ten years ago (£14,316)
The average asking price of a first-time-buyer home is at a record of £224,943
The latest data shows average gross monthly salaries have increased by 31% in ten years
The current average mortgage rate for a two-year fix is just over 3% compared to just under 6% ten years ago
Demand for first-time-buyer type properties is up 35% compared with 2019, despite affordability challenges
Tim Bannister, Rightmove’s Housing Expert, says:
“First-time buyers trying to get onto the ladder are currently facing average monthly mortgage payments that are 20% higher than the start of the year due to rising interest rates and asking prices, and that’s assuming they’ve been able to overcome the hurdles to raise a large enough deposit.
“A new record first-time buyer asking price of £224,943 means that a 10% deposit for a first-time buyer type home is now 57% higher than it was ten years ago, while average salaries have only increased by 31%.
“With each jump in interest rates, home-owners are contributing approximately 1% extra of their gross salary on average towards a mortgage, and a 0.5% increase in the base rate would take average monthly mortgage payments towards 40% of their salary, a level not seen since 2012, while a 0.25% rise would be around 39%.
“Average mortgage rates for a two-year fix are just over 3% compared to nearly 6% ten years ago, so they are still historically low.
“However, as they creep upwards, the large number of first-time buyers looking to move this year may look for some financial certainty by locking in longer mortgage terms.
“Demand for first-time buyer type homes is up 35% compared to the last ‘normal’ market of 2019, which shows a high motivation to move from first-time buyers despite the challenges.”