Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.
One in Three First-Time Buyers Now Considering Variable Mortgages
A third of first-time buyers are now considering variable or tracker mortgages, according to figures from Moneyfacts. The proportion of first-time buyers comparing costs on variable deals rose to 31% in July, up from just under 10% in February.
Moneyfacts data shows that the increase in interest in variable and tracker mortgages comes as fixed-rate mortgage costs have risen. The average 90% loan-to-value (LTV) two-year fixed rate increased from 5.09% in February to 5.74% in July. For a first-time buyer borrowing £200,000 over a 25-year term, this means monthly repayments increased from around £1,180 to £1,257.
In comparison, the average 90% LTV two-year tracker rate in July was 4.8%, resulting in monthly repayments of around £1,146 for the same loan amount. This represents a saving of approximately £111 per month, or more than £1,300 a year, for borrowers choosing the tracker rate over the fixed rate. However, repayments on tracker mortgages could increase if the Bank of England raises the base rate.
The data does not indicate how many first-time buyers ultimately chose a tracker or variable deal, and it is likely that many were also considering fixed rates at the same time. The figures suggest that higher fixed-rate costs have prompted more first-time buyers to consider their options.
For letting agents and inventory clerks, these trends may influence the types of mortgage products new landlords and tenants are considering, potentially affecting affordability and demand in the UK property market.
Source: Mortgage Strategy