First-Time Buyer Mortgage Rates Rise Despite Falling Inflation

by | Wednesday 26th Jul 2023 | Mortgage News

First-time buyer mortgage rates increase, despite inflation easing.

First-time buyer mortgage rates increase, despite inflation easing. (Source:

Last week it was announced, to much joy and relief, that inflation in the UK had fallen to a level below what was initially predicted. The Bank of England are currently aiming for an inflation rate of 2%. Despite drastic measures being taken with interest rate rises, UK inflation still remains much higher than the 2% figure. Economists predicted that by now inflation would sit at around 8.3%, however recently released data shows that to has dropped to 7.9%. Giving millions hope that rates will start to come down soon. But it seems that first-time buyer mortgage rates experienced a surprising surge since the inflation news was announced, with some rates spiking by as much as 0.28%, according to a report released by Rightmove.

What Has Rightmove’s Report Shown About First-Time Buyer Mortgage Rates?

Rightmove revealed that the average monthly mortgage payment for a first-time buyer property valued at £225,552 with one to two bedrooms, on a five-year fixed deal at 85% loan to value (15% deposit), currently stands at £1,256. This is a £32 per month increase compared to the previous week’s average figures. For the same type of property on a five-year fixed deal at 60% LTV (40% deposit), the average monthly mortgage payment increased to £864, up £9 from the previous week. Not a huge increase admittedly, but still an increase.

To many people, the rise in mortgage rates might come as a bit of a surprise, considering that inflation recently reached a sixteen-month low. According to the Office for National Statistics, inflation fell to 7.9% in June 2023, down from 8.7% in May and 11% in previous months. Typically, falling inflation would ease pressure on the Bank of England to increase the base interest rate, which currently stands at 5%.

Financial markets, however, are still looking at things with caution. Investors believe that the decline in the cost of living might not be enough to completely alleviate the pressure on the Bank of England to raise interest rates, and we could still see a more moderate increase in the base rate. Which could explain why rates are still going up in most lender’s cases. The property market has also taken a bettering over the last few months, with affordability challenges, and the recent increase in mortgage rates for first-time buyers is likely to add further strain. With property prices remaining high and wage growth not keeping pace, many potential buyers might find it more challenging to step onto the property ladder.

Speak To a First-Time Buyer Mortgage Expert

As the situation unfolds and more is revealed in time by the Bank of England, it will be crucial for potential first-time buyers to closely monitor interest rate movements and seek professional financial advice to understand the implications of these changes on their mortgage affordability. Going it alone when buying a house in any economy is not a wise move, especially one as volatile as the UK property and mortgage market at the moment. Here at Oportfolio mortgages, we are experts in first-time buyer mortgage rates and mortgages. Read our First-Time Home Buyer Questions To Ask A Mortgage Broker or contact our Putney mortgage team today to see how we can help you make your dream of home ownership a reality.

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If you have any questions about UK mortgage news or or anything you’ve read then please get in touch. We’d love to hear from you.

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