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Soaring energy costs will eat into efforts to save for a first-home deposit – Twenty7tec

  • 30/08/2022
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The new energy price cap will erode efforts by first-time buyers (FTBs) to save up for a deposit and it will also hurt people who have already bought a house by requiring a bigger cut of their take-home pay.

According to mortgage technology provider Twenty7tec, FTBs were buying houses worth £283,154 and while some were securing a five-year fixed mortgage at 3.4 per cent (the best rate in the market at the moment for FTBs), just over half (51 per cent) were choosing a mortgage of 28 years or less.

They typically had a deposit of 23.75 per cent of the purchase price and had an average combined salary of £56,693 for both single and joint applications. This equates to take-home pay of £3,448 for a single and £3,833.10 for a couple where one earner makes £30k and the other £26,683.

Energy price explosion

Last year, according to Ofgem, the average energy bill for a first-time buyer per household would have been £1,339 or about a third of an FTB’s monthly take-home salary.

James Tucker (pictured), founder of Twenty7Tec, said: “This year, the cap is rising to £3,549. The increase is going to hit FTB households to the tune of £2,110 per year compared to this time last year – equivalent to two whole months’ mortgage payments.”

Twenty7Tec said annual energy costs last year took up 34.9 per cent of one month’s take-home pay while this year they would require 92.6 per cent of one month’s take-home pay.

Energy bills last year were about the same as six weeks’ typical mortgage payments but would rise to more than 15 weeks’ mortgage payments this year.

“A working housing market needs a functioning first-time buyer market,” said Tucker. “Together with the active buy-to-let market, it allows the rest of the property chain to keep moving smoothly. The energy price cap just announced will dramatically affect those looking to take their first step on the property ladder.”

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