Most UK first-time buyers now pay more on mortgages than rent
More than half of first-time buyers in the United Kingdom now pay more on their mortgage than they paid in rent, estate agent Hamptons found. In September, 56% did, up from 28% five years ago. Rising mortgage rates since the war in Iran began are behind the shift.
Most first-time home buyers in the U.K. are now paying more each month on their mortgage than they did in rent, according to new data from the estate agent Hamptons, The Times and The Guardian reported.
Of renters who bought their first home in September, 56% took on a monthly payment higher than their old rent, The Times reported. Five years ago, when mortgage rates were low, that share was 28%. The Guardian reported that it is the highest share in at least a decade.
On average, these buyers paid £1,266 a month on their mortgage, compared with £1,227 in rent, an extra £39, The Times reported. A decade ago, first-time buyers' mortgage payments were about 13% less than their rent.
Buyers in their 40s saw the biggest jump, The Guardian reported. About 67% of them took on mortgages costing more than their rent, and their payments were 18% higher on average.
"When interest rates were low, the financial case for tenants to buy as soon as they could was fairly straightforward," said Aneisha Beveridge, head of research at Hamptons. "Higher mortgage rates have turned that equation on its head."
Rates have climbed since the war in Iran began, as an energy shock revived inflation and markets began betting on rate increases, The Times reported. The average two-year fixed rate is 5.55%, up from 4.25% before the war, The Times reported. The Guardian, citing Moneyfacts, put the two-year average at 5.96% on Monday and the five-year rate at 5.99%.
The housing market is slowing, The Times reported. Rightmove said sales are down 8% so far this year, and listings are at a 12-year high. Rents keep rising too. New rents across Great Britain rose 2.7% from a year earlier in September, the fastest pace in almost two years, The Guardian reported. The average is now £1,433 a month.
"The immediate monthly saving that once rewarded tenants for making the leap has largely disappeared," Beveridge said.
What we know: In September, 56% of UK first-time buyers paid more on their mortgage than their rent.
What we don't: Whether rates will rise further in the coming months.
Where outlets agree The Times and The Guardian both report Hamptons data showing 56% of first-time buyers paying more on their mortgage than their old rent, by £39 a month on average.
Where they differ The cited reports agree on the key facts so far.