First-time buyers need extra £12k of income to purchase a house as rising interest rates and cost of living crisis bites

• First-time house buyers will need an extra £12,000 to get on the property ladder
• Property firm Zoopla warns that it’s a blow for those trying to get a mortgage 
• The Bank of England says workers will need a pay rise to main standard of living

First-time buyers will need an extra £12,000 on their pay to get on the property ladder as interest rates soar.

The warning by property firm Zoopla is another hammer blow for those struggling to get a mortgage this year as the cost of living crunch leaves more people priced out of the market.

The figures are even worse in the South East with buyers needing an extra £15,750 in income, while in London it is as high as £34,500. In the North East, the increase will be less than £5,000.

Richard Donnell, of Zoopla, said: ‘Some outpriced first-time buyers will look to buy smaller, lower value homes as rising interest rates impact affordability. They may also consider moving further afield as post-pandemic circumstances allow many to continue hybrid working. Higher mortgage rates for new loans have more than doubled since January 2022.’

Property firm Zoopla has warned first-time buyers will need an extra £12,000 on their pay to get on the property ladder as interest rates soar

The Bank of England has already said that workers will need a 10 per cent rise in salary to maintain their standard of living, let alone purchase a property.

The research comes as mortgage rates have touched an eight-year high, currently averaging 4 per cent.

Data also shows that there are already fewer deals to choose from, with 4,407 mortgage products available at the start of August, down 149 since the beginning of July.

Zoopla added: ‘The income needed by a first-time buyer to purchase a home will increase by an average of £12,250.

‘As more people are priced out of the market it means less demand from first-time buyers which will hinder house price growth.’

Already the housing market has shown signs of cooling.

According to Rightmove, the average asking price has dropped 1.3 per cent – or £4,795 – to £365,173 this month.

The news comes as financial markets are betting the Bank of England will more than double interest rates by May next year as inflation continues to spiral. Many are anticipating Bank interest rates of 4 per cent in May compared with 1.75 per cent today.

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