First-time buyers are paying £350 a month more on mortgage repayments than they were five years ago, it has been revealed.
This group is typically paying £931 a month compared to £578 in 2019 – an extra £4,236 a year – according to research by experts at Rightmove.
The higher cost of buying a home comes despite the fact that all the major banks and building societies – Halifax, Nationwide, the NatWest group, Santander, Barclays and HSBC – have been cutting mortgage rates in recent months.
Rightmove’s calculations are based on a first-time buyer being able to put down 20 percent and spreading the cost of the mortgage over 30 years on a home which has two-bedrooms or fewer.
It puts the typical five-year fixed mortgage rate for buyers in this category at 4.58 percent, which compares to just 2.13 percent in 2019.
The typical cost of a first-time buyer home has also increased by 18 percent over the past five years, rising from £192,221 to £227,570, which means young buyers need to borrow more at these higher interest rates.
On the plus side, average earnings have increased by around 28 percent since 2019. However, this has been offset by increases in the cost of essentials such as energy, food, broadband and mobile contracts.
The increase in the cost of getting on the property ladder means more young adults are living at home with their parents. Others are putting off getting married and having children, which has long term consequences for the shape of families and the economy.
The average age of a first-time buyer is now 33 compared with 32 in 2019, while the average mortgage term for a first-time buyer is now 31 years, compared with 29 years in 2019, based on UK Finance data.
More than one in five took out mortgages with terms of between 36 and 40 years in the three months between April and June this year.
In London, a typical starter home is now nearly five times the average annual salary of two people, the most of any region. This means that many first-time buyers may struggle to borrow enough to afford the home that they want, with lenders typically able to mortgage up to 4.5 times a combined income.
As a result, first-time buyers in the capital are having to stump up 44 percent more on mortgage payments than those who bought five years ago.
In the North West, the average monthly mortgage payment is up by 75 per cent compared with five years ago. This is because on top of higher interest rates, house prices have increased to a greater extent in the North West, with the average asking price for a home up by 29 percent over the past five years.
In Wales, average mortgage payments are also up 75 pe cent while in Yorkshire and The Humber, the average monthly mortgage payment is up by 74 percent compared with five years ago.
Tim Bannister, a property expert at Rightmove, said: “The improving market conditions compared with last year have led to a recovery in activity in the typical first-time buyer sector ‘We’re seeing more choice in this sector for would-be first-time buyers, and more potential buyers contacting agents versus last year.
“However, mortgage rates, while improved from the peak, are still high against recent norms. This has led to first-time buyers taking out longer terms, waiting longer to build up their deposit, and looking at cheaper areas to get onto the ladder.
“First-time buyer affordability remains stretched and any support that can help more to get onto the ladder would be welcome.”
Matt Smith, Rightmove’s mortgage expert, said: “There are many people out there, particularly first-time buyers, who find themselves priced out of the home that they want because they can’t borrow enough or pass the stressed rate test. As our regional analysis shows, there are several hurdles for first-time buyers to clear, made more difficult with higher mortgage rates, and payments outpacing wage growth.
“Lenders, both new entrants to the market and major lenders, have looked at how they can work within the existing framework to provide more support to first-time buyers which has been really encouraging to see. We think there is the opportunity for the government to help unlock greater long-term affordability in a responsible way through a wider review of affordability criteria alongside the regulators and lenders.”
