More than half of first-time buyers in the UK are now paying higher monthly mortgage costs than they previously paid in rent, according to research from estate agent Hamptons.
The proportion of first-time buyers facing increased housing costs reached 56% last month, the highest level in at least a decade. On average, these buyers are paying £39 more per month on their mortgage than they did on rent.
Mortgage rates climb above 6%
The shift follows a sustained increase in mortgage rates since the start of the Middle East conflict, with volatility in bond markets driving up swap rates that influence fixed-rate mortgage pricing. Earlier this month, the average cost of a five-year fixed-rate mortgage exceeded 6% for the first time in three years. As of Monday, the average five-year fixed rate stood at 5.99%, whilst two-year fixed rates averaged 5.96%, according to Moneyfacts.
Aneisha Beveridge, head of research at Hamptons, said the change represents a fundamental shift from recent years when low interest rates made the financial case for buying straightforward. “Higher mortgage rates have turned that equation on its head,” she noted, adding that whilst long-term benefits of home ownership remain, “the immediate monthly saving that once rewarded tenants for making the leap has largely disappeared.”
Older buyers face steeper increases
First-time buyers in their 40s experienced the largest jump in housing costs, with 67% taking on mortgages exceeding their previous rent. For this age group, monthly mortgage costs averaged 18% higher than their former rental payments.
The findings come as the UK housing market shows signs of slowing, with higher borrowing costs dampening buyer activity.
Rental market continues upward trajectory
Simultaneously, rental costs continue to rise across Great Britain. Newly agreed rents increased by 2.7% annually in September, the fastest pace in nearly two years. The national average rent now stands at £1,433 per month, up from £1,396 in September last year.
In Greater London, average monthly rents on new lettings reached £2,357, representing a 1.5% annual increase. The south of England recorded the steepest growth, with average rents rising 3.7% to £1,419.
Beveridge noted that higher rents have primarily affected tenants moving home so far this year. “But if growth continues to pick up, it is likely to feed through to more existing tenants in the coming months as the gap between new and existing rents widens,” she said.
The data highlights the challenging conditions facing both prospective homeowners and renters, as the anticipated autumn housing market recovery fails to materialise amid elevated mortgage rates and limited housing stock.
