A survey has found that increasing mortgage rates are still a “significant barrier” for prospective first-time buyers.
The research by Mortgage Advice Bureau (MAB) found that 42% of first-time buyers believe mortgage rates will make it more difficult to purchase a property.
It also found that 24% of first-time buyers worry that mortgage rates won’t drop quickly enough for them to afford a loan.
At the same time, almost a third worry they won’t be able to afford the monthly repayments.
Falling mortgage rates
In spite of mortgage rates dropping through the year, research from MAB found that 29% of first-time buyers cited mortgage rates as one of the biggest blockers to buying.
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At the end of last month, the average two-year fixed rate stood at 5.52%, down from 6.05% a year earlier, according to Moneyfacts.
However, following a summer of optimism fuelled by declining mortgage rates, autumn has seen a slight uptick.
Higher interest rates
Markets have started to consider a period of higher-than-initially-predicted interest rates, and lenders have, in turn, repriced upwards.
This could have an impact on the number of prospective first-time buyers choosing to buy, MAB suggested.
Danny Belton, head of lending at MAB, said: “Rates have risen since the summer as shifts in the global economic environment have driven up borrowing costs for lenders.
“It is understandable that higher mortgage rates cause concern for first-time buyers, but they shouldn’t put off their home buying dreams.
“Deals are still available and innovations like rental recognition products and a growing market for higher-loan-to-value [LTV] mortgages are helping first-time buyers to get onto the property ladder.
“For those planning to buy next year, starting early is key. Locking in a rate now doesn’t mean missing out – if a better deal emerges when you make an offer, you can switch.”
