More than half of UK first-time buyers paying more for mortgage than they did for rent

A recent study by estate agent Hamptons reveals that more than half of first-time homebuyers in the UK now find their monthly mortgage payments exceed their previous rent, marking the highest proportion in at least a decade. The average additional cost has risen to £39 per month. This shift is attributed to increasing mortgage rates since the onset of the Iran war, which have driven up swap rates in bond markets, affecting fixed-rate mortgage pricing.

The average cost of a five-year fixed-rate mortgage recently surpassed the 6% mark for the first time in three years, currently standing at 5.99%. Moneyfacts reports an average rate of 5.96% for two-year fixed mortgages.

Aneisha Beveridge, Hamptons' head of research, explains that while home ownership still offers long-term benefits like equity building and security, the immediate financial advantage of buying over renting has diminished with rising interest rates. Notably, first-time buyers in their 40s face the most significant increase, with 67% of them paying more in mortgage costs than rent on average. These higher costs have averaged 18% more than their previous rent payments.

Simultaneously, rent prices continue to climb nationwide. Renting agreements have increased by 2.7% annually in September, the fastest pace in nearly two years, with the average monthly rent now at £1,433 across Great Britain, up from £1,396 last year. In Greater London, the average rent for new leases reached £2,357, a 1.5% increase from the previous year.

The south of England saw the steepest rise, with average rents increasing by 3.7% to £1,419 per month. Beveridge notes that recent rent hikes have mainly impacted tenants moving homes. However, if the rental growth persists, it's likely to influence more existing tenants as the gap between new and existing rent levels widens.