Rightmove data on potential interest rate rise
- 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, said: “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.”
- The first-time buyer monthly mortgage payment is based on Bank of England data of the averages for 90% LTV two-year fixed mortgages from lenders, and the average asking price of a typical first-time buyer home (two bedrooms or fewer) using the Rightmove House Price Index.
- Salary data is based on the Average Weekly Earnings (AWE) dataset from ONS
You May Also Enjoy
Closing the gap on client relationships and recommendations
Northern Ireland to expect over 25,000 new home movers
Red tape and rising costs stifling new-build availability across the capital
UK’s new wave of ‘second cities’ offers strongest yield growth for property investors
Decline in change of use further constricting housing supply