Rising interest rates coupled with the end of the Help to Buy scheme have created a “double whammy” for first-time homeowners in the UK, according to the Liberal Democrats.
New research from the Lib Dems reveals that first-time buyers will be £4,000 worse off compared to last year.
The study finds that first-time buyers who bought a house in 2022 had access to the Help to Buy scheme, providing an interest-free loan of 20% of their house value, alongside the benefit of low interest rates which resulted in lower monthly repayments.
The closure of the Help to Buy scheme combined with soaring interest rates have resulted in first-time buyers facing 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 standing at £250,000, first-time buyers now face a monthly mortgage bill of £1,389, which is £354 a month higher than they would have paid in 2022. Over the next year, this equates to an additional financial burden of £4,252.
The situation is particularly stark for Londoners who previously had 40% of their house value covered under the Help to Buy scheme. A first-time buyer in the capital could now face annual mortgage costs of £9,058 higher than last year, or an additional £755 a month.
The Liberal Democrats have called on the Government to establish a fund to support young families who are struggling to meet the increased mortgage payments and at risk of repossession.
The proposed Emergency Mortgage Protection Fund would provide grants of up to £300 a month to those whose mortgage payments have increased by more than 10% of their income.
Liberal Democrat Housing Spokesperson, Helen Morgan MP (pictured), expressed her concern over the current climate for first-time buyers: “There has never been a worse time to be a first-time buyer. The Government has pulled the rug from under 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.”
She added: “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.”
