An interest rate rise to 6% would hurt homeowners, says Rightmove

Rightmove has warned that the average monthly mortgage payment for a household buying a first-time buyer home would increase to £1,302 if the average mortgage rate rose to 6%, as looked likely this week.

That is based on a borrower taking out a two-year fixed mortgage, at 90% loan-to-value (LTV).

The property portal says that this monthly payment would be 60% higher than those getting on the ladder at the start of 2022.

For two people buying a first home together and splitting the £1,302 payment, the monthly payment each of £651 would equate to 25% of their gross average salary, up from 15% at the start of the year.

The last time the average mortgage rate was 6% on a 90% LTV two-year fix was in May 2012, when the average asking price of a first-time buyer home was £142,686. Back then the average monthly mortgage payment on a first-time buyer home was £833, which was 21% of the average gross salary for two people splitting the payments

For a solo first-time buyer, the average lending criteria of 4.5 x their salary means they would need to be earning £45,000 to buy a home at the average first-time buyer price of £224,479. If rates rose to 6% this would equate to 35% of their salary, up from 22% at the start of the year

The average asking price of a first-time buyer home is now £224,479, making it £22,448 for a 10% deposit

Despite affordability challenges, demand for first-time buyer homes is up 27% on the pre-pandemic five-year average

 

Property industry reacts to Rightmove House Price Index

 

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3 Comments

  1. Justsayin

    What a headline, it actually took Rightmove to tell us that, we’d never have guessed!!

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  2. Charlie Lamdin

    A medal to RM for stating the bleedin obvious.

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  3. WiltsAgent

    This assumes that house prices will remain at the same levels when plainly, if rates continue rising, prices will start dropping. As a by product making houses prices more affordable.

    Zero or near zero interest rates are not normal and have over inflated prices. A correction is long overdue.

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