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UK Property Market Update: Rising Costs for First-Time Buyers

UK Property Market Update: Rising Costs for First-Time Buyers

In recent years, first-time buyers in the UK have faced significantly increased mortgage costs. Since the last general election, monthly mortgage payments for these buyers have surged by over 60%, now exceeding £1,000. This steep rise highlights the financial hurdles many Britons encounter when attempting to enter the UK property market.


Significant Increase in Monthly Payments

Data from Rightmove reveals that the average monthly mortgage payment for a first-time buyer has climbed from £667 in 2019 to £1,075 in 2024. This sharp rise is primarily due to escalating house prices and higher interest rates, which have compounded financial pressures on borrowers.


Stagnant Wage Growth


While mortgage costs have soared, average wages have only increased by 27% over the same period. This disparity has made it difficult for many first-time buyers to manage their monthly payments, prompting some to seek smaller properties or opt for longer mortgage terms to reduce monthly costs.


Adjusting to Higher Costs


Tim Bannister, a property expert at Rightmove, notes that the gap between mortgage payments and wage growth has led many first-time buyers to consider 30- or 35-year mortgage terms to lower their monthly payments. Additionally, buyers are increasingly looking for less expensive homes to minimise borrowing needs.


Current Housing Market


The average price of a first-time buyer home in Great Britain is now £227,757, marking a 19% increase since 2019. Regionally, the north-west has seen the most significant rise in first-time buyer prices, with a 33% increase to £177,588. London remains the most expensive region, with prices growing by 6% to an average of £507,049.


Government Support and Policy


Experts like Bannister are calling for the government to implement policies that support first-time buyers, particularly in helping them save for deposits and qualify for mortgages. The Conservative and Labour parties have proposed various measures in their manifestos aimed at this demographic. The Conservatives plan to make the temporary stamp duty threshold of £425,000 permanent for first-time buyers and introduce a new help-to-buy scheme. Labour proposes a comprehensive mortgage guarantee scheme to support 95% home loans.


Impact of Interest Rates


Recently, the Bank of England has maintained interest rates at 5.25%, marking the seventh consecutive hold. This has kept borrowing costs high, leading millions of homeowners to remortgage at significantly higher rates over the past 18 months. The cumulative effect is expected to add up to a collective bill of £12bn by the end of the year, according to the Resolution Foundation.


Market Trends and Economic Conditions


A survey by the Bank of England indicated that half of the investors expect a rate cut in the upcoming monetary policy meeting, with three-quarters anticipating a cut by September. Meanwhile, the job market is showing signs of stagnation, with average UK salaries experiencing a slight decrease in May. The average advertised salary dropped to £38,765, marking the first decline since October 2023.


Conclusion


The financial landscape for first-time buyers in the UK has become increasingly challenging due to rising mortgage costs, relatively slow wage growth, and high interest rates. Government intervention and supportive policies will be crucial in easing these burdens and helping prospective homeowners achieve their goal of owning a home.


Source: The Guardian

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