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First-time buyers face £200 rise in mortgage costs

Written by: Samantha Partington
First-time buyer demand has outpaced pre-pandemic levels despite higher mortgage rates and asking prices reaching record levels.

Mortgage payments are almost £200 higher a month for a first-time buyer with a 15% deposit buying a home now compared to this time last year.

But mortgage rates have come down from their peak in October, when former Prime Minister Liz Truss’s mini Budget announcements drove mortgage rates sharply up. Compared to October’s crop of first-time buyers, those purchasing now will pay £161 less a month.

Mortgage rates steady

Analysis by Rightmove found that first-time buyers taking an average five-year fixed rate over 25 years at 85% loan to value (LTV) to buy a home with two bedrooms or less would have paid £865 a year ago, £1,218 in October and £1,056 today.

The average rate for a five-year fixed at 85% LTV is now 4.44%, down from an average of 5.89% in October, but up from 2.76% this time last year.

The average asking price for a first-time buyer type property is now a new record of £224,963.

Payments rise further up ladder

Buyers moving up the property ladder to buy their second property, at an average price of £339,359, would pay £1,594 for a mortgage now compared to £1,843 in October and £1,307 a year ago.

Those at the top of the ladder purchasing a home priced on average at £666,566 would pay £3,130 a month for their mortgage today, compared to £3,709 in October and £2,574 a year ago.

Rightmove’s mortgage expert Matt Smith said: “It was understandable that some buyers took a step back in the immediate aftermath of the mini Budget, particularly first-time buyers, 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.”

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