First-time buyer mortgage payments 61% higher since last election

There’s just a week to go until we go to the polls in the general election. We’ve called for more support for home-movers, and people looking to take their first step onto the property ladder.

Our latest study into first-time buyer mortgage payments – and how they’ve changed over the last five years since the last general election in 2019 – really puts a spotlight on the support needed to help people who’re trying to buy their first home.  

House prices have increased by 19% since the last general election, but this is a national average, and varies by region. In contrast, the average monthly mortgage payment has jumped by 61% for first-time buyers.  

In 2019, the average monthly mortgage repayment for a first-time buyer was £667 a month, based on the average 80% loan-to-value (LTV), five-year fixed mortgage rate of 2.24%. But this average payment has now risen to £1,075, based on an average five-year fixed mortgage rate (80% LTV) of 5.09%.  

Our property expert, Tim Bannister, says: “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.”

So, what can be done to help first-time buyers onto the property ladder?

There are some key priority areas we think the next government should address to help all home-movers and have highlighted the need for more support, specifically for first-time buyers.  

In our recent survey, one of the top five things home-movers want to see prioritised is the introduction of more mortgage assistance schemes to help make moving home more affordable. Renters told us they want to see more support for first-time buyers as the top priority, with mortgage schemes in second place.  

Our mortgage expert Matt Smith suggests a review of mortgage affordability criteria could help: “There’s an opportunity to unlock greater affordability in a responsible way, which could help more first-time buyers get on the ladder. First-time buyers are already taking out longer mortgage terms and lender innovation has included the introduction of longer-term fixed rates that are likely to be part of the solution as they help by ensuring certainty of payments.” 

When could mortgage rates go down?

A Base Rate reduction in June from the Bank of England had been eagerly anticipated, however it was held again, and remains at 5.25%. But inflation has now dropped to the Bank’s target of 2%, and hopefully this is the first step on the journey towards lower mortgage rates in the second half of the year. This may have more of an immediate impact on first-time buyer affordability than some of the pledges we’re seeing in the main party manifestos. 

Market expectations are still that the first Bank of England rate cut is more likely to be later in the summer. 

The header image for this article was provided courtesy of Cundalls, Malton

READ MORE: What are the current UK mortgage rates?