Blow for first-time property buyers as mortgage repayments surge by two thirds

THE cost of a typical first-time buyer’s mortgage repayments jumped by almost two thirds last year as families were stung by rising interest rates and a boom in house prices.

Buyers purchasing a typical semidetached house were hit with a £481 increase in their payments in the 12 months to December 2022, according to the Office for National Statistics.

It lifted the typical monthly bill to £1,262, an increase of 61pc.

This was driven by soaring interest rates, which climbed to an average 5.05pc – three times the 1.59pc rate a year earlier, before the Bank of England began to put up borrowing costs. The findings will fuel fears that the property crisis is becoming even worse as firsttime buyers find it still harder to get on the ladder. The increase in monthly mortgage payments is far more than the 10pc rise in house prices last year.

Researchers’ calculations were based on an average £286,000 semi-detached home and a 75pc mortgage with a 25-year term.

Buyers in London and the South East, where house prices are highest, have been hit with the biggest cash increases in buying costs.

A buyer purchasing a semi-detached house in the capital in December 2022 had to pay £1,132 more per month than if they had bought a year earlier.

In December 2021, a buyer with a 25pc deposit and a budget of £1,000 a month could have bought a semidetached house in nearly two thirds of Britain’s local authorities. By December 2022, this share had dropped to 30pc.

When it comes to detached properties, a buyer with a budget of £1,000 per month can purchase in only one of Britain’s 362 local authorities – Co Durham.

Mortgage rates have declined since they peaked in October 2022, in the wake of the mini-budget, but they are unlikely to drop further while the Bank of England is still raising the Bank Rate.

The ONS numbers came as a Bank of England rate-setter warned that raising interest rates further risked “deepening the pain for households”, which have already been squeezed by soaring prices.

Swati Dhingra said lifting rates higher than their current 4pc level risked pushing the economy into a deep decline.