First-time buyers face big jump in mortgage costs

First-time buyers are facing much higher mortgage costs than 10 years ago, with a 41% jump in payments.

While house prices and deposit amounts are broadly unchanged in real terms, the mortgage rates are far more expensive.

In 2016, the average two-year fixed mortgage rate at 75% loan-to-value stood at just 1.72%, resulting in an estimated monthly repayment of £600 over a 25-year term. This is equivalent to £860 in today’s money.

But the average mortgage rate now stands at 5.13%, with monthly repayments at £1,213.

41% higher

So first-time buyers face monthly mortgage repayments that are £353, or 41%, higher than a decade ago.

In 2016, the average UK property cost £195,035, equivalent to £279,293 in today’s money. By comparison, the actual average property price in 2026 stands at £273,037, making it £6,256 cheaper in real terms than a decade ago.

Chancellor John Healey unveiled a new scheme for first-time buyers, which is only available for new-builds, in his Budget last month.

Substantial commitment

Verona Frankish, Chief Executive of Yopa (pictured), says: “House prices have long been the focus of the affordability debate, but our research demonstrates just how significant an impact mortgage rates have on the actual cost of getting onto the property ladder.

“Despite the average property price and deposit requirement remaining broadly unchanged in real terms over the last decade, first-time buyers are now facing monthly mortgage repayments that are 41% higher due to increasing mortgage rates.

“That’s a substantial additional financial commitment for those looking to purchase their first home.”

Rise further

Meanwhile, Moneyfacts data reveals higher loan-to-value (LTV) deals are increasing in number, as first-time buyers take on larger mortgages.

Borrowers with a limited deposit or equity of 5% or 10% will find the average fixed rates rose further above 6%.