0.5% rate rise would see FTB mortgage payments hit 40% of salary

Average first-time buyer monthly mortgage payments are currently 38% of an average gross salary and average monthly mortgage payments for new first-time buyers are currently £976 per month, compared with £813 in January.

If Bank Rate rises by 0.25% the average monthly mortgage payment for new first-time buyers would increase to £1,003 nationally, and if it rises by 0.5% it would increase to £1,030.

Rightmove's analysis shows that the average asking price of a first-time buyer home is now at a record of £224,943 and a 10% deposit on the average home is now 57% higher than ten years ago (£14,316).

In comparison, average gross monthly salaries have increased by 31% in the last decade.

Despite ongoing affordability challenges, Rightmove's research shows that demand for first-time buyer type properties is up 35% compared with 2019.

Tim Bannister, Rightmove’s housing expert, said: “First-time buyers trying to get onto the ladder are currently facing average monthly mortgage payments that are 20% higher than the start of the year due to rising interest rates and asking prices, and that’s assuming they’ve been able to overcome the hurdles to raise a large enough deposit. A new record first-time buyer asking price of £224,943 means that a 10% deposit for a first-time buyer type home is now 57% higher than it was ten years ago, while average salaries have only increased by 31%.

“With each jump in interest rates, home-owners are contributing approximately 1% extra of their gross salary on average towards a mortgage, and a 0.5% increase in the base rate would take average monthly mortgage payments towards 40% of their salary, a level not seen since 2012, while a 0.25% rise would be around 39%.

“Average mortgage rates for a two-year fix are just over 3% compared to nearly 6% ten years ago, so they are still historically low. However, as they creep upwards, the large number of first-time buyers looking to move this year may look for some financial certainty by locking in longer mortgage terms. Demand for first-time buyer type homes is up 35% compared to the last ‘normal’ market of 2019, which shows a high motivation to move from first-time buyers despite the challenges.”