FTBs face deposits of £81,510: The Telegraph


First-time buyers (FTBs) face quadrupling their deposits on a typical £81,510 home to secure a property as rates remain high, according to The Telegraph.

New buyers now need to find a 43 per cent cash deposit if they want to keep their repayments at the same level as when average mortgage rates were 2 per cent, the estate agent explains in a Telegraph report.

When mortgage rates were at 2% just over two years ago, the story goes, an FTB buying a typical £247,000 house with a 10% down payment was paying £941 a month on a 25-year mortgage .

However, a two-year fix is ​​currently 6.48%, according to Moneyfacts, which would mean an FTB would need to have a 43% deposit in order to keep monthly payments at £941.

The story goes on to say that even if rates fall back to 6%, FTBs would need a 41% down payment, or an additional £74,100, to keep repayments at 2020 levels on a typical home.

In July 2020, the average rate on a two-year fix was 1.99%. Since the beginning of October 2021 alone, the average rate for a two-year fixed rate mortgage has increased from 2.25% to 6.48% last week.

FTBs who cannot find larger deposits face much higher mortgage bills, with monthly payments of £1,500 on a £247,000 house with a 10% deposit and mortgage rates at 6.5 %. A jump of nearly 60% from when rates were at 2%.

But borrowers with such high repayments would face tough affordability stress tests.

Brokers say the effect of these higher rates on FTBs has caused demand to drop nearly in half, along with a greater reliance on family members to help with deposits, the newspaper reports.

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