• Rising rates and withdrawal of Help to Buy leaves “double whammy” for young homeowners 

• Londoners facing staggering £9k annual hit

• Liberal Democrats slam Government: “There has never been a worse time to be a first-time buyer”. 

A first-time buyer will be over £4,000 worse off compared to if they’d bought a house last year, new analysis by the Liberal Democrats has found.

A year ago, first-time buyers had access to Help to Buy, which gave them an interest-free loan worth 20% of their house value. Those buyers also enjoyed low interest rates, meaning their monthly bills were lower. 

However, Help to Buy has now closed and rates are soaring, meaning first-time buyers face mortgage rates over 5% and monthly repayments nearly double what they would have paid a year ago. 

With the average first-time buyer house price in England at around £250,000, first-time buyer monthly mortgage bills are now £1,389 per month - £354 a month higher than they would have been last year. Over the next twelve months, that equates to a staggering hit of £4,252.

The situation is even worse for Londoners, as Help to Buy covered 40% of their house value. A first-time buyer in London now faces annual mortgage costs that are £9,058 higher over a year, or £755 a month, compared to if they’d purchased a house in 2022. 

The Liberal Democrats are demanding the Government brings in a fund to help young families unable to afford the rise in mortgage payments and struggling to avoid being repossessed. Under the proposals, those who have seen their mortgage payments increase by more than 10% of their income could apply for grants of up to £300 a month to help cover the cost of the rise. 

Liberal Democrat Housing Spokesperson Helen Morgan MP said: 

“There has never been a worse time to be a first-time buyer. Nevermind Help to Buy, now it's hell to buy. Young families are facing a mortgage double whammy. 

“The Government has pulled the rug from underneath young families who have scrimped and saved to get on the housing ladder. Mortgage rates have spiralled out of control after months of Government failure to bring down inflation. 

“It is time Ministers stepped in and saved Brits at risk of losing their first home. We could have young families losing their home with these eye-watering rate hikes. An Emergency Mortgage Protection Fund could ensure no hardworking family loses their home because of this economic meltdown.”

ENDS

NOTES TO EDITORS

Full analysis available here.

First reported by the Daily Mail here.

Monthly repayments on a five-year fixed-rate mortgage taken out in May 2022, with Help to Buy and 2.79% interest; compared to one taken out in May 2023 with no Help to Buy and 5.01% interest. 25 year term used in both examples.

Average interest rates for 5-year deals in May 2023 and one year ago from Moneyfacts, reported by the Telegraph on 25 May.

Purchase price is the average first-time buyer price for London and England in May 2022 and March 2023 (latest data available), rounded to the nearest to £10k. [UK House Price Index: data downloads March 2023, First time buyer and former owner occupier]

The Help to Buy scheme allowed first-time buyers to purchase a property with a deposit of at least 5%. Homebuyers could borrow up to 20% (40% in London) of the purchase price from the Government and repay that amount interest-free for five years. After five years an interest rate of 1.75% applied.

The Help to Buy scheme closed on 31 October 2022.