Record low for FTB mortgage rates

Date Published 29 June 2016

According to the latest research from Your Move & Reeds Rains, the average mortgage rate for those taking their first step on to the property ladder slipped further during May to 3.08% – a new record low. This follows a fall of 0.37% over the course of the past year.

Despite the climbing overall cost of a home, these cheaper rates mean mortgage repayments have not increased significantly as a proportion of first time buyer`s income. As of May, mortgage repayments accounted for 21.1% of income, just 1.7 percentage points more than a year ago. Meanwhile, the average first-time buyer deposit currently sits at £27,669, up 12.8% (or £3,146) from £24,523 a year ago. When compared to the average first-time buyer income of £39,651, this represents an extra 29 days` worth of salary. As a proportion of income, the average deposit has climbed 6.1 percentage points compared to May 2015.

Adrian Gill, director of estate agents Your Move and Reeds Rains, had this to say: `High LTV mortgage options like the Help to Buy schemes are giving more first-time buyers a fighting chance of getting on the housing ladder. But putting together a chunk of cash to put down on a property remains problematic for many. Some first-timers are helped by the Bank of Mum and Dad, or through an inheritance or gift from a family member. Others are forced to move home with their parents while they save. But most continue to struggle to save while paying a considerable proportion of their income on rent.

This highlights the importance of the rental market to first-time buyer prospects. Maintaining a healthy private rental sector (PRS) is absolutely key to achieving homeownership aspirations. The government`s current agenda, managing landlord demand by taxing the PRS more heavily, is likely to filter through to tenants in the form of higher rents making the challenge of saving for a deposit even more difficult. The new PRS policies may well hurt the very demographic they are trying to help – first time buyers.`