Home / Royal Mail / Why you will need another £4,000 a year to afford your first home

Why you will need another £4,000 a year to afford your first home

First-time buyers will need to find £4,000 a year more to pay the mortgage when interest rates rise to their highest in a decade.

Buyers with 5pc deposits have been spared the significant interest rate rises suffered by more affluent borrowers so far this year.

But rampant inflation means they will soon bear the brunt of further increases, according to analysis by the Centre for Economics and Business Research.

The average rate of a two-year fixed deal for a borrower with a 5pc deposit will climb to 5.8pc by the end of next year, up from 3pc today, if the Bank of England’s central interest rate hits 2.5pc as predicted. Mortgage rates for first-time buyers have not exceeded 5.1pc since the second half of 2013, according to the Cebr.

It would mean an average first-time buyer with a £210,205 mortgage over a 25-year term would see their monthly payments rise from £997 to £1,329 – equivalent to an extra £3,984 a year, or roughly 12pc of the national average salary.

By contrast, the current average two-year fixed rate for a borrower with a 25pc deposit is currently 2.7pc, but this will rise to 4.7pc by the end of next year, according to Cebr.

In the past six months banks have kept pricing for first-time buyer deals competitive and shielded borrowers from successive interest rate rises by the Bank of England. But they are due a sharp correction.


Source link

About admin

Check Also

Here’s what the legacy of the Birmingham Games must be for Scotland

THE Commonwealth Games in Birmingham and now well and truly over, and I really did …

Leave a Reply

Your email address will not be published. Required fields are marked *