Rising mortgage costs mean millennials who bought their first home around 2011 will be the first generation of homeowners to see their monthly payments rise in the second half of their 25-year term.
The average millennial paid £246,000 for a home and £863 per month, in 2024 prices, for their mortgage during the five years after they bought, according to analysis by estate agent Hamptons.
This compares to £923 per month for the average Generation X first-time buyer, who paid £149,000 for their first home, and £775 for a baby boomer, who paid £74,000 for a property.
Hamptons’ new Generational Affordability Index reveals how mortgage repayments have changed over time for homeowners of all ages.
In the analysis, older mortgage repayments have been inflation-adjusted to reflect 2024 prices. This enables a comparison of housing costs across different generations.
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Impact of ultra-low interest rates
Despite paying more for their homes than the previous two generations, because of ultra-low interest rates, millennials have paid a similar amount in mortgage repayments.
Millennials initially faced mortgage rates of around 1.5%, while Generation X paid 6.7% and baby boomers paid 13.5%.
Now that rates are much higher, millennials will see their monthly payments increase as they go into the second half of their mortgage term.
Mortgage cost pain
Higher payments will start from the first remortgage that millennials take out after late 2022.
This means that, on average, they will still have 61% of their projected total mortgage repayments to make at the midway point of their mortgage term.
At the same point, the average baby boomer had 41% left to pay and Generation X had 40%.
Both generations saw their mortgage repayments fall sharply during the second half of their mortgage term as inflation and then interest rates dropped.
The picture is bleaker for anyone from Generation Z who may be looking to buy a home now.
They face mortgage repayments of £1,739, roughly twice those paid by millennials (£863) when they first bought.
Squeeze on budgets in later life
Aneisha Beveridge, head of research at Hamptons, said: “Millennials started buying their first homes in the shadow of the 2007 crash, back when house prices were on their way up and mortgage rates on their way down.
“However, the shift towards higher mortgage rates in recent years has changed everything. Millennials have been uniquely squeezed. They’ve taken on lots of debt at record low rates, only to see those rates rise. And with rates set to stay higher for longer, most millennials are likely to see their mortgage payments increase as they enter the second half of their mortgage term.”
Beveridge says it is likely that money that was enjoyed or invested by previous generations at the same point will be tied up for longer by millennials’ and Gen Z’s mortgage bills.
