Photo by Mortgage Market Update: Approvals Near Two-Year High, But First-Time Buyers Face Higher Costs
The UK mortgage market is showing signs of growth, with approvals nearing a two-year high in June, according to data from UK Finance. The number of mortgages approved for house purchases rose to 42,653 in June, up from 42,407 in May and close to April’s two-year high of 42,792.
However, the news is not all positive, particularly for first-time buyers. Analysis suggests that those looking to get onto the property ladder can expect to pay around £400 more per month for their mortgage than five years ago. This is due to a combination of rising house prices and increasing mortgage rates.
Mortgage rates have been on the rise, making it more difficult for first-time buyers to get onto the property ladder.
The average first-time buyer mortgage payment has risen by 61% since 2019, from £667 to £1,075 per month, according to calculations by Rightmove. This is based on a 20% deposit, a 25-year mortgage term, and a five-year fixed-rate mortgage on an average rate.
House prices have also been rising, making it more difficult for first-time buyers to afford a home.
Across Britain, first-time buyers now face paying £227,757 for a home, an amount that has jumped by nearly a fifth (19%) since 2019, according to Rightmove. In the north west of England, asking prices for first-time buyer homes have jumped by a third (33%) since 2019, while London has seen the smallest percentage rise of just 6% over the past five years.
Tracker mortgages may become more attractive if interest rates fall, but borrowers need to weigh the benefits against the potential risks.
With interest rates expected to fall in the near future, tracker mortgages may become a more attractive option for some borrowers. However, it’s crucial to weigh the benefits against the potential risks. If the economic outlook changes and the base rate holds for longer than anticipated, monthly payments might not decrease as quickly as expected, making a cheaper 2-year fixed rate a better choice.
Seeking advice from a whole-of-market mortgage advisor can help borrowers make an informed decision tailored to their circumstances.
Assessing your financial stability, risk appetite, and long-term plans is essential before deciding on a tracker mortgage. Speaking with a whole-of-market mortgage advisor can also help you make an informed choice tailored to your circumstances.
In conclusion, while the mortgage market is showing signs of growth, first-time buyers face significant challenges in getting onto the property ladder. Rising house prices and increasing mortgage rates have pushed up the cost of homeownership, making it more difficult for young people to afford a home. However, with interest rates expected to fall in the near future, tracker mortgages may become a more attractive option for some borrowers. It’s crucial to weigh the benefits against the potential risks and seek advice from a whole-of-market mortgage advisor to make an informed decision.
