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.'