At present, there are more first-time buyers than any other buying group in the market today. In fact, property interest from first-time buyers is 46% higher than it was last year. There have been 177,000 transactions from this buying group so far this year alone.

However, with mortgage rates rising to 4% this means that first-time buyers will need on average £12,250 more income to secure a mortgage. Therefore, it’s important to consider how you can offset these rate rises to be able to get onto the property market.

Property type

Following the pandemic, buyers are looking for larger homes to accommodate home or hybrid working. Over half of the enquiries are for three-bedroom homes, which are currently 10% higher than they were in August last year.

Zoopla data shows that buyers are now expanding their location search, seeking properties that are further afield in cheaper areas. This means that they are buy a home sooner as they spend less time saving for a deposit – whilst also avoiding any future rate rises whilst they save.

Interest rates

The economic situation doesn’t seem to be dampening appetite for first homes – but further rises in interest rates may have an impact. August levels have been lower than normal but this is typical of the summer slowdown we see every year.

If you are a first time buyer, moving from a 2% mortgage rate to 4% means that you will require an extra £12,250 in income to secure a mortgage offer. This is outside of London – if you live in London, you’ll require an average £34,500 which is a huge stretch for many.

Renting versus buying

And at the moment, buyers are saving an average of £200 by paying a mortgage with a mortgage rate of 2.5% rate as opposed to renting. Even with a 4% interest rate, it is still cheaper to pay a mortgage in most places in the UK.

Offset rate rises

If you are a first-time buyer, there are several things you can do to offset interest rate rises.

Broaden your area – consider being more flexible on location as properties tend to be cheaper if you live outside major cities. This means your monthly repayments will be smaller and you’ll pay less interest.

Boost savings – you’ll see an increase in the rates on your savings or ISA if you’re on a carriable rate but shop around to see what interest rates people are offering helping you to save faster.

Check schemes – There are several schemes that could help you to get onto the property ladder.

Talk to family – can your family help with a larger deposit? This will help you to offset rising rates.

Get sound mortgage advice – It’s important to understand how different types of mortgages are impacted by the rate changes. An independent mortgage broker will help you to find the best mortgage for your circumstances – you could also extend your mortgage term depending on your age, this will keep your repayments down.