Since the last general election, mortgage payments for first-time buyers has skyrocketed by 61 per cent, significantly outpacing wage growth.
Rightmove’s latest study on first-time buyers highlights that since the 2019 election mortgages have increased from £667 a month to £1,075 a month – with rates remaining elevated. Median figures for five-year fixed 80 per cent Loan-to-Value mortgage is set at just over fiver per cent, whereas in 2019 the LTV rate was two and a half per cent. Despite burgeoning mortgage and rental prices, wages have only risen by 27 per cent over the same five-year period.
The study conducted by Rightmove has shown that prices in the North West of England have risen the most for first-time buyers and the property site suggests that: ‘If a Bank of England rate cut can lead to lower mortgage rates, it will have a more immediate impact for first-time buyers than election housing promises.’
The online property giant claims that ‘mortgage payment calculations assume first-time buyers are taking out a five-year fixed mortgage, spread over 25 years, at 80% Loan-To-Value (LTV).’ An 80 per cent LTV mortgage is the average for first-time buyers according to UK Finance data.
In response to Rightmove’s report on average first-time buyer mortgage payments, Nathan Emerson, CEO of Propertymark, comments:
“Surging interest rates and inflation over the last few years have impacted the housing market with force. However, with the next general election now under two weeks away, Propertymark is keen to see targeted support for first time buyers at the first opportunity from any incoming government. The potential of homeownership should never be a prospect that is ever out of reach for people. As inflation is now back within the range initially targeted, we are optimistic to see the base rate cut as soon as realistically possible, which would be very welcome news for people stepping onto the housing ladder when it does happen.”
Meanwhile, the average first-time buyer home is now £227,757, rising by 19 per cent since 2019, however prices have risen more sharply in different areas. At a regional level, the North West has seen the biggest jump in first-time buyer prices at 33per cent above 2019, while London has seen the smallest rise of just 6 per cent in five years as demand for luxury property has shown to decrease.
Demand for prime London homes valued at above £2M had declined in the first financial quarter, according to the latest analysis. Super prime property, valued at above £10M, has also seen a drop in demand – with just a handful of locations seeing an increase in buyer appetites.
Firm Benham and Reeves have revealed from their London Buyer Demand Index that market activity has shown consumers straying from luxury London properties. Demand is based on the proportion of all homes listed for sale across the prime market that have already been sold subject to contract.
Despite an increase of only six per cent in the country’s capital, figures from earlier this year have shown the UK’s least attainable addresses are within the London Borough of Barking and Dagenham – which have been declining in affordability over the last decade with house prices more than doubling to £380,000 and wages only rising by £2,182.
Another London Borough, Hillingdon, ranked second in the study, conducted by the ONS and analysed by Getamover.co.uk. Since 2013 the average house price in the area has risen by £230,000 and the median salary only increased by £143.
Other areas of the nation where house prices have soared include Nottingham, Gedling and Slough. Two other London Boroughs have been named in the study – showing a growing trend of unaffordability in the capital.
Local trends from the Rightmove study show that 16 out of the top 20 areas across Great Britain that have seen the biggest jump in first-time buyer prices are being located in the North West and Wales, though Bolsover in the West Midlands tops the list at a 55 per cent rise in average asking prices.
Rightmove suggests that a ‘Bank of England rate cut will have the most immediate benefit for those trying to get onto the ladder, should it as expected lead to lower mortgage rates’.
The online property site say that their ‘key ask of the next government is that they prioritise long-term solutions and policies to help more first-time buyers onto the ladder, over short-term policies that only help very small groups of people’.
Tim Bannister, Rightmove’s property expert, commented: “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. 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.”
