First-time buyers pay £140 more per month

FIRST-TIME buyers taking out a mortgage have seen monthly repayments rise by up to £140 during the coronavirus crisis, after nervous lenders hiked rates to a five-year high.

Bank of England data shows the average rate on a two-year fixed mortgage for someone with a 10pc deposit has risen from 1.97pc in February to 3.32pc last month – the highest level since June 2015.

Finance information firm Moneyfacts said this has pushed up the monthly repayment on a £200,000, 25-year mortgage from £845 to £982 – a rise of £137.

Rates on two-year fixed mortgages for those with a 5pc deposit jumped from 2.74pc to 3.95p over the same period, pushing up repayments by £100 a month.

In contrast the average rate on a two-year fixed deal for someone with a 25pc deposit or equity had edged up from 1.4pc to 1.74pc.

The figures come a day after Boris Johnson pledged more support for first-time buyers.

Although the Bank of England has slashed interest rates to a record low of 0.1pc to boost the economy, borrowers with smaller deposits are being treated with caution. There are growing concerns that house prices, which have staged a dramatic comeback as the lockdown has lifted, could fall when the furlough scheme closes at the end of the month.

Economists fear a surge in unemployment could cause the market to slam into reverse, pushing many home buyers with smaller deposits into negative equity.

Eleanor Williams from Moneyfacts said: ‘The increase may be seen as a further blow to wouldbe first-time buyers, at a time when increasing their level of deposit may already seem impossible due to rising prices and low savings rates.’