Mortgage Payments for First-Time Buyers Increase by 61% in 5 Years

The average first-time buyer mortgage payment has surged by 61 percent since the last UK general election in 2019, as per data from Rightmove released on Monday. Over the past five years, the mortgage payment for a typical first-time buyer home has risen from an average of £667 per month to £1,075 per month.

Mortgage rates in the UK have been on a steady rise and are currently at their highest rates since the global financial crisis of 2007–2008.

According to Rightmove’s data, the increase in average mortgage payments for first-time buyers has more than doubled wage growth in the UK, which has only increased by approximately 27 percent over the same period.

Tim Bannister, Rightmove’s property expert, stated in a press release on Monday: “As rates have increased over the last five years, the amount that a typical first-time buyer is paying each month on a mortgage has outstripped the pace of earning growth.”

“Some first-time buyers are looking at extending their mortgage terms to 30 or 35 years to lower monthly payments, or looking at cheaper homes for sale so that they need to borrow less.”

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“If mortgage rates reduce, this will help first-time buyers in the short-term more so than election housing promises. We hope that the next government can support first-time buyers with well thought out policies, which address the difficulties of saving up a large enough deposit and being able to borrow enough from a lender.”

Rightmove revealed that house prices across Britain have surged by almost 20 percent in the last five years.

For instance, first-time buyer homes in northwest England have experienced a price increase of 33 percent since 2019, compared to 6 percent in London.

First-time buyers in the UK are now looking at an average cost of £277,757 for their own home, with those in the capital potentially facing a cost of half a million pounds.

Rightmove’s calculations are based on the assumption that first-time buyers would make a 20 percent deposit over a 25-year term, and opt for a five-year fixed-rate mortgage at an average rate.

Even though Consumer Prices Index (CPI) inflation has slowed down to the government’s target of 2 percent, the Monetary Policy Committee (MPC) decided to keep interest rates unchanged for the second consecutive month.

“For some members within this group, the return of headline inflation to 2 percent, while welcome, was not necessarily indicative of the required sustained return to target,” stated the MPC summary.

Mark Harris, chief executive of mortgage broker SPF Private Clients, mentioned in a statement to The Epoch Times on Monday, “Getting on the housing ladder is virtually impossible unless buyers have some assistance from the bank of mum and dad.”

Mr. Harris highlighted the heavy dependence on family members due to the “significant gap between incomes and property prices,” as well as “soaring rents which make it difficult to save up for a deposit.”

“The majority of first-time buyers who come to us for mortgage advice have some assistance in the form of a cash deposit, a parent acting as a guarantor or taking out a joint mortgage,” Mr. Harris added.

“First-time buyers are getting older and taking out longer mortgage terms because this is often the only option if they want to get on the housing ladder.”

“Affordability is a huge concern for first-time buyers and is only going to get worse with rising rents and the high cost of living,” he said.

“A reduction in interest rates would help,” he mentioned. “Plus the building of more homes that first-time buyers can afford, in places where they want to live, but it seems that housing is not being made the priority that it needs to be.”

Joint research by Zoopla and Ipsos released on Monday indicated that 40 percent of UK voters believe that housing is not given enough focus by political parties.

The report revealed that both homeowners and renters agree that the top priority for the incoming government should be constructing more affordable homes, while private renters feel that controlling the pace of rent rises should be the priority.

One third of the respondents in the survey of over 1,100 adults across the UK identified helping first-time buyers into the property market as a crucial issue, despite this demographic being the focus of most proposed housing policies.

Richard Donnell, executive director at Zoopla, stated in a press release: “British voters have high expectations from a new government on housing. The overarching response is: ‘Build more homes, but other things matter too’.”

“It is clear voters are well aware of the pressures on the housing market with reducing homelessness and rough sleeping and doing more to reduce empty and under-utilised homes in the top three priorities,” Mr. Donnell mentioned.