The 10 most affordable areas for first-time buyers as mortgage rates stay elevated
Mortgage rates have gradually decreased over the past year, but the end of stamp duty relief in England and Northern Ireland is just weeks away.
The temporary stamp duty discounts are set to return to their previous levels at the end of March, meaning over 25,000 first-time buyers in England could miss the crucial deadline.
Starting in April, first-time buyers purchasing homes priced at £425,000 will face a tax of £6,250, compared to the current nil-tax threshold. For homes between £500,001 and £625,000, this amount will rise to £11,250.
Although wage growth has outpaced the rise in average asking prices for first-time buyer homes over the past five years, affordability remains a significant challenge. Even with the gradual drop in mortgage rates, the average monthly mortgage payment for first-time buyers (for homes with two bedrooms or fewer, based on a 30-year mortgage term) is still £350 (+59%) higher than it was five years ago.
Currently, a typical first-time buyer is paying £940 per month on their mortgage, up from £590 per month in 2020. However, this is still £155 less than the peak in July 2023.
The average five-year mortgage rate stands at 4.69%, compared to 2.22% in March 2020 and 6.11% in July 2023.
Mortgage expert Matt Smith comments: “Higher mortgage rates mean homebuyers must consider how much they can afford to pay monthly, even if they can meet the asking price of a home. Affordability is further restricted by how much first-time buyers can borrow. It’s encouraging that the regulator is exploring ways to help first-time buyers borrow more responsibly, which could help unlock more opportunities, especially for those with smaller deposits.”
10 Most Affordable Areas for First-Time Buyers
For those considering more affordable areas to buy, Kilmarnock in Ayrshire, Scotland, is the cheapest place for first-time buyers to enter the market, with an average asking price of just over £84,000.
Greenock in Inverclyde follows in second place with an average asking price of £88,862, while Grimsby in Lincolnshire ranks third at £93,427.
What Do the Stamp Duty Changes Mean for Homebuyers?
The impact of the stamp duty changes depends largely on the house price and whether you're a first-time buyer. For first-time buyers purchasing homes between £500,001 and £625,000, the potential impact is the greatest, with an additional £11,250 in moving costs if they miss the end of March deadline.
As of February, over 550,000 homes were in the process of legal completion—25% more than at the same time last year. This has raised concerns about a possible conveyancing "log jam" as buyers rush to complete transactions before the deadline, particularly in London, where there are 28% more first-time buyers than last year.
With the average time to complete a property transaction around five months, many buyers have been working against the clock since November to meet the deadline. Estate agents report that while some buyers may have to withdraw from their transactions if they miss the deadline, many are continuing with their purchases, having already factored in the potential additional costs.
How Much Can You Borrow with a Mortgage?
The amount you can borrow with a mortgage is determined by an affordability assessment, and your interest rate is based on the size of your deposit, also known as the loan-to-value (LTV) ratio.
LTV is a percentage that reflects the size of the mortgage relative to the value of the home you're buying. The larger your deposit, the lower your LTV, and vice versa.
To get a clearer idea of how much you could borrow, you can use Rightmove mortgage calculator. For a more personalised estimate, applying for a Mortgage in Principle will bring you one step closer to a formal mortgage offer.