A first-time buyer index from online mortgage and savings platform Tembo showed that buying is still a better financial decision than renting, despite affordability pressures and mortgage rate volatility.
The average first-time buyer is £7,600 better off after one year and £64,000 better off after five years than the average renter, the figures show.
However, it is still hard to get on the ladder, with the average deposit higher than a full year’s average take-home pay of £39,668.
Richard Dana (pictured), CEO of Tembo, said: “First-time buyers are facing one of the toughest markets in decades, with higher deposits, rising living costs and stretched borrowing requirements.
“But what this data shows clearly is that, over time, buying still significantly outperforms renting for most people.
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“Trying to time the market perfectly is incredibly difficult. What matters more is getting on the ladder when you can and staying there. With this new index, we want to give would-be first-time buyers clearer, data-driven insights to help them understand their options and make more confident decisions.”
Affordability improves
Despite stagnant incomes, falling mortgage rates have improved affordability in the short term, the study showed. This mirrors figures from Rightmove out today that showed improving affordability for all types of buyers.
The average first-time buyer mortgage rate dropped to 4.48%, its lowest level in more than two years, reducing monthly repayments and bringing housing costs below 30% of income for the third consecutive quarter.
However, upfront costs remain a major obstacle. Saving for a typical deposit now takes over a decade for many buyers, assuming modest saving rates.
At the same time, most buyers are entering the market already indebted, with 80% holding an average balance of £9,277 in loans before they even buy a property.
The index also revealed a regional divide for buyers, with Glasgow the most affordable place for first-time buyers and London the least affordable.
Buyers in Glasgow would be £122,872 better off over five years compared to renting.
