Rising rates leave first-time buyers desperate

With the surge in house prices over recent years, affordability is now more of an issue than ever.

Nearly half though, are worried that house prices will become even more unaffordable the longer they wait and a quarter feel if they don’t buy now they never will.

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Such urgency is making people anxious to buy, at almost any cost.

In their latest research, Bradford and Bingley, the parent company of Mortgage Express, revealed that 13 per cent of FTBs had already taken out, or were looking to take out, an interest-only mortgage without any intention of having some sort of investment plan to repay the capital at the end of the mortgage term.

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Gus Park, director of intermediary sales for Mortgage Express, said: “Fixed rate deals have always been popular with first-time buyers because of the security they offer. If you are stretching yourself financially, it helps to be able to plan your budget.”

Well over a third of FTBs are spending between £151,000 and £250,000 on their first property; this rises significantly to 53 per cent and 52 per cent for those buying in London and the South East respectively, making these areas by far the most expensive.

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On top of this, many first-timers are unrealistic about the associated costs that come with buying a home, such as stamp duty, with 52 per cent saying that when faced with such costs they were higher than expected.

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Disturbingly, 9 per cent were not aware of any associated costs even though these can add a substantial amount to the overall total of buying a property.

Park said: “Home ownership is part of the nation’s fabric, but it would seem that some first-time buyers are increasingly desperate to get onto the property ladder. They are not being deterred by mounting debts, rising property prices or potential rate increases.

“Alarmingly, some are opting for interest-only mortgages without any means by which to pay back the capital at the end of the term.”