First-time buyers will need to earn an extra £12,250 to afford a home as mortgage rates are set to rise further this year, Zoopla said.
Meanwhile, hopeful buyers in London will need a whopping £35,000 more income to take out a loan on the average property than a year ago, according to the House Price Index of the real estate portal.
With interest rates raised by the Bank of England to help curb spiraling inflation, first-time home buyers are set to bear the brunt of increasingly unaffordable mortgages.
Demand is increasingly fragile and first-time buyers who have supported the market are feeling the pressure
The central bank set the base interest rate at 1.75% in August, marking the biggest increase in 27 years.
Traders in the city predict rates could hit 4% in the new year as double-digit inflation in the UK rises even further.
Low-income first-time buyers, owners looking to swap their current home and buyers in the South East of England and the capital will feel the greatest impact in terms of what they can afford, warned Zoopla Friday.
Additionally, property prices continue to rise, with the average home now costing £19,800 more than last year. That’s a year-over-year jump of 8.3%, Zoopla said.
It also means that buying could become more expensive than renting in some areas due to rising interest rates driving up the cost of monthly mortgage repayments. Until recently this was not the case for all areas outside of London.
However, housing demand has not weakened as much as people might expect, despite rising prices and rising living standards, Zoopla noted.
This is because homebuyers generally have higher disposable income and are better protected against the impact of the rising cost of living.
In contrast, lower-income households tend to rent or own their homes and spend more of their budget on basic necessities and utilities, the real estate site added.
But while the housing market has held up so far, home sales are expected to slow from the fall to 2023 once we start to see the impact of rising costs on affordability for first-time buyers. said the experts.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The housing market may not be as safe as houses because while annual price increases are still impressive, there are signs of weakness. .
“Demand is increasingly fragile and first-time buyers who have supported the market are feeling the pressure.
“First-time buyers are driving the housing market, especially as they represent just over a third of all sales.
“When they get cold feet, it takes over the rest of the market, so those who want to move up the ladder find themselves unable to move their old property and are stuck in limbo.”