How would 6% mortgage rates affect affordability?

Based on the average current salary for a first-time buyer with a 10% deposit, the average monthly mortgage payment would rise to £1,302 if the average mortgage rate rose to 6% for a 90% LTV two-year fix.

This monthly payment would be 60% higher than those getting on the ladder at the start of 2022.

For two people buying a first home together and splitting the £1,302 payment, the monthly payment each of £651 would equate to 25% of their gross average salary, up from 15% at the start of the year.

The last time the average mortgage rate was 6% on a 90% LTV two-year fix was in May 2012, when the average asking price of a first-time buyer home was £142,686. Back then the average monthly mortgage payment on a first-time buyer home was £833, which was 21% of the average gross salary for two people splitting the payments.

For a solo first-time buyer, the average lending criteria of 4.5 x their salary means they would need to be earning £45,000 to buy a home at the average first-time buyer price of £224,479. If rates rose to 6% this would equate to 35% of their salary, up from 22% at the start of the year.

However Rightmove says that despite affordability challenges, demand for first-time buyer homes is up 27% on the pre-pandemic five year average.