As if first-time homebuyers don’t have enough obstacles to overcome on the journey to owning a home, now they are typically paying close to £200 more a month on their mortgage repayments compared to a few years ago. What is causing this increase and what does it mean for new homeowners?
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Higher home loan rates and sky-high properties are the leading reasons for this increase, according to figures from Rightmove. These factors only exacerbate the issues first-time buyers already face. And with rent prices also on the rise, it is becoming increasingly difficult to save enough to get onto the property ladder.
A first-time buyer who was able to secure their home with a 15% deposit, is now paying £1,056 a month. This figure is up £191 per month, compared with the £865 the same individual would have paid only a year ago. These numbers are based on the average asking price of starter homes, those with one or two bedrooms that appeal to first-time buyers. Prices have hit an average of £224,963, so together with the average fixed-rate interest rate deals on the market, many potential homeowners are quickly being priced out of owning property.
Just because fixed-rate deals offer a sense of stability, does not mean that they are affordable, as demonstrated by the high mortgage rates for fixed deals that have been increasing recently, exponentially so after the mini-budget last autumn.
Currently, the average new two-year fixed rate is 5.29% and 4.69% for five-year fixes, according to Upswitch. While it is possible to find deals with better rates than these, there is usually strict criteria that needs to be met in order to qualify.
Despite this, the housing market is actually performing well, going against previous predictions that it would struggle amidst the continued cost of living crisis.
All potential buyers can do is watch, wait, and save until conditions swing in their favour, so be sure to stay up to date on mortgage and property news and consult the experts at Dental & Medical Financial Services when you’re ready to get on the property ladder.