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First-time buyers hit with 60pc increase in mortgage payments

Young woman walking past an estate agent window looking pensive
Some homeowners are looking to extend their mortgage terms to afford payments - Andy Rain/EPA-EFE/Shutterstock

First-time buyers are paying almost two thirds more in mortgage payments since the last election, new figures show.

The monthly mortgage payment for an average first-time home has risen by 61pc, from £667 in December 2019 to £1,075, because of soaring interest rates, according to Rightmove.

The rise had “significantly outpaced wage growth,” it said. Wages grew 27pc in the past five years.

Average interest rates for five-year fixes with a 20pc deposit rose from 2.24pc in 2019 to 5.09pc in 2024, driven by successive rises to the Bank of England’s base rate. Last week, the Bank decided to hold rates at 5.25pc for the seventh time. Forecasters had predicted the Bank Rate would fall to 4.75pc by the end of 2024, but markets now expect them to be 5pc.

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Since the last election, the asking price of a typical first-time buyer property has risen by 19pc to £227,757, Rightmove said.

However, some regions have recorded starker rises than others: asking prices in the North West have soared by a third in five years. In Bolsover, Derbyshire, asking prices have soared by 55pc since the last election. Meanwhile, in London, prices had risen by just 6pc.

Tim Bannister, of Rightmove, said some first-time buyers were looking at extending their mortgage terms to 30 or 35 years to lower their monthly payments, or were looking at cheaper homes.

He said: “As rates have increased over the past five years, the amount that a typical first-time buyer is paying each month on a mortgage has outstripped the pace of earning growth.

“If mortgage rates are reduced, 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.”

Nathan Emerson, of Propertymark, which represents estate agents, called on the Government to provide more targeted support to first-time buyers. “As inflation is now back within the range initially targeted, we are optimistic to see the base rate cut as soon as realistically possible, which would be very welcome news for people stepping onto the housing ladder when it does happen.”