Autumn Budget 2024: more help needed for first-time buyers
On 30 October, Chancellor of the Exchequer Rachel Reeves will deliver the first Autumn Budget from the new Labour government.
Ahead of the Budget, our latest study into first-time buyer mortgage payments – and how they’ve changed over the last five years – really puts a spotlight on the support needed to help people who’re trying to buy their first home.
Our weekly mortgage tracker, which compares average mortgage rates since 2019, shows that the average monthly mortgage payment for a typical first-time buyer is now £931, compared with £578 in 2019, a difference of £353. However, this is still more than £150 cheaper than the peak in July 2023.
The calculations are based on a first-time buyer being able to put down a deposit of 20% and spreading the cost of the mortgage over 30 years, on a home which has two-bedrooms or fewer. Meanwhile, the asking price of homes of this size in Great Britain has risen by 18%, and is now £227,570, compared with £192,221 in 2019.
First-time buyers are waiting longer to buy a home and spreading the cost of their mortgage out for longer. 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.
Our property expert, Tim Bannister, says: “We’re seeing more potential first-time 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.”
First-time buyer mortgage payments across different areas of Great Britain
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 loan up to 4.5 times a combined income. Those looking to purchase on their own would find it even more difficult.
In the North West, the average monthly mortgage payment is up by 75% compared with five years ago, and the average asking price for a home is up by 29% over the same period, the highest increase of any region.
In Yorkshire & The Humber, the average monthly mortgage payment is up by 74% compared with five years ago, while the average wage in the region is up by 25% – the biggest gap in wage growth and average mortgage payment increase across Great Britain over the last five years.
| Region | Average asking price for a first-time buyer home | Average monthly mortgage payment | Monthly mortgage payment vs 2019 (£) | Monthly mortgage payment vs 2019 (%) |
|---|---|---|---|---|
| East Midlands | £192,588 | £788 | +£320 | +68% |
| East of England | £272,930 | £1,117 | +£397 | +55% |
| London | £502,098 | £2,054 | +£623 | +44% |
| North East | £135,736 | £555 | +£227 | +69% |
| North West | £175,804 | £719 | +£309 | +75% |
| Scotland | £139,901 | £572 | +£231 | +68% |
| South East | £293,438 | £1,201 | +£429 | +56% |
| South West | £255,427 | £1,045 | +£414 | +66% |
| Great Britain | £227,570 | £931 | +£353 | +61% |
| Wales | £184,992 | £757 | +£323 | +75% |
| West Midlands | £194,398 | £795 | +£320 | +67% |
| Yorkshire and The Humber | £177,488 | £726 | +£309 | +74% |
So, what can be done to help first-time buyers onto the property ladder?
The current affordability criteria set by the financial regulators includes a typical borrowing cap of 4.5 times a combined income, and a stressed rate test at around 9.0%. This is to ensure that movers don’t overstretch themselves and could still afford their mortgage payments if their circumstances change.
Lenders have their own policies within this regulatory framework, and positive steps have been made to look at how first-time buyer affordability can be improved. We think a wider review of mortgage affordability criteria could help to unlock greater first-time buyer affordability at scale responsibly.
Our mortgage expert Matt Smith says: “Market regulation has had its intended impact to help prevent people from overstretching themselves when taking out a mortgage. It also means that 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.”
How much can you borrow with a mortgage?
A good way to find out how much you could borrow is to use a Mortgage Calculator. And to get a personalised result by applying for a Mortgage in Principle which will take you one step closer to a mortgage offer.
Read more about the different types of mortgages and how to choose a mortgage term that meets your needs, both now and in the future.
Please note: Your home may be repossessed if you do not keep up repayments on the mortgage. Rightmove is not authorised to give financial advice; the information and opinions provided in these articles are not intended to be financial advice and should not be relied upon when making financial decisions. Please seek advice from a regulated mortgage adviser.
The header image for this article is provided courtesy of John Francis, Tenby
READ MORE: What are the current UK mortgage rates?
