Trouble Lies Ahead for First Time Buyers, Deposit Rates Soar

With today's mortgage rates, first-time buyers need a quadrupled deposit of £106k to purchase a typical £247k property.

Even if home prices drastically decline, many first-time buyers will still find it difficult to enter the housing market, according to a think tank. The Resolution Foundation warned that getting on the property ladder would become just as difficult as it was before the crisis due to declining salaries and tightened mortgage lending standards. To reduce their monthly payments, first-time buyers should expect to pay hundreds of pounds extra. In addition, recent research reveals that first-time buyers need to double their deposit to £106,000 in order to buy an ordinary home, with experts claiming that this is the worst moment ever to be starting from scratch in the market.

Prospective homeowners are thousands of dollars out of pocket as a result of rising rates, a shortage of inventory, and the end of Help to Buy. According to research from the Hamptons estates firm, consumers hoping to start on the housing ladder would now need a 43% deposit if they want to keep their repayments the same as when average mortgage rates sat at 2%. Mortgage rates are currently hovering around 6.5 percent. According to its estimates, purchasers would pay £941 per month with a 10% deposit of £24,700 and a 25-year mortgage for a typical home costing £247,000 at a time when interest rates were at 2%.

However, a first-time buyer now would require a 43% deposit of £106,000 to keep monthly payments at £941 if they were to purchase the same house with mortgage rates at 6.5%. This necessitates finding an extra £81,510 in cash, which most people would find to be unattainable.

There has never been a worse time for first-time buyers, according to James Turford, chief operating officer and co-founder of Even, a lender that specialises in them.
He states “house prices are 9.8 times the average salary, inflation and interest rates are high, Help to Buy just ended, and in the meantime there is a dearth of low-deposit mortgages, making it challenging to purchase. This is the highest ratio of house prices to wages in history.” It would be a more financially suitable alternative to continue letting properties out to tenants, rather than opting for a quick sale in this current climate. Wectory is a company which specialises in the provision of rental income in advance for landlords who wish to stimulate their cash flow without selling off their home for a reduced price, or alternatively, not have the property stay vacant while the market stabilises.