Key facts
- Surging mortgage rates, attributed to the Iran war, have increased the average London homebuyer's deposit by £35,500.
- The average UK deposit has risen by £18,400 since January due to increased borrowing costs.
- Average five-year mortgage rates have climbed from below 4% in January to approximately 4.8%.
- First-time buyers are disproportionately affected by larger mortgage terms and loans.
- UK housebuilders are lobbying the government for interventions, such as stamp duty cuts for first-time buyers.
Mortgage rate hikes, exacerbated by the conflict in the Middle East and specifically the Iran war, have significantly increased the financial burden on homebuyers in the UK, particularly in London. According to homes portal Zoopla, the average London homebuyer now faces an additional deposit cost of £35,500. This surge in borrowing costs has pushed the average UK deposit up by £18,400 since January, with five-year mortgage rates climbing from below 4% to around 4.8%.
The increased deposit requirements are a direct consequence of lenders hiking rates in response to geopolitical instability. The impact is particularly acute for first-time buyers, who often require larger loans and longer mortgage terms. In response to these challenges, UK housebuilders such as Bellway and Barratt Redrow, along with property portal Rightmove, are calling on the government to implement measures like stamp duty reductions for first-time buyers to stimulate demand.
Despite reduced buying power, Zoopla reports that buyers are not scaling back their requirements and many are choosing to wait for rates to decrease or for potential market shifts. However, there are indications of an upcoming boost in the housing market, with a 7% year-on-year increase in home searches on the platform, although sales agreed remain 6% lower. Property experts suggest that an autumn market rebound is likely, but any increase in tax speculation from September could temper this momentum.