First-Time Buyers Hit By Double Whammy

First time buyers are now faced with higher house prices and rate rises. Higher house prices alone have added £75 to a typical first-time buyer’s monthly costs compared to last year. Interest rate increases bring this up to almost £120.

More first-time buyers choose longer-term and interest-only mortgages which can cut more than £300 off monthly payments, according to the Nationwide Building Society. Their chief economist, Fionnuala Earley, said:
“As interest rates have increased to their highest level in over five years, the question of affordability again raises its head. Compared to a first-time buyer entering the housing market in December 2005, a first-time buyer today would have to borrow more money, raise a larger deposit and pay higher interest rates than at this time last year. Some of today’s first-time buyers face a monthly mortgage payment of £285 more than they would have done this time last year.
“However, the national picture, as always, hides the regional variations across the country. The deterioration in affordability resulting from faster house price growth alone was much more severe in some parts of the UK than others. Northern Ireland, where prices increased by a staggering 41% in 2006, stands out”.