My Choice Mortgage Blog

New figures have revealed that first-time buyers are now paying an eye-watering £163,047 on rent before they are able to purchase their first home. This represents a 40 per cent increase in a decade, according to research from specialist mortgage lender Perenna 1 . Back in 2015, renters typically spent £116,427 before buying. Today, they are parting with £46,621 more, as rising rents and living costs make saving for a deposit harder than ever 1 . This amount is now equivalent to a 60 per cent deposit on the average UK home, highlighting how much money is being spent without building equity or ownership 1 . Why It Matters to Existing Homeowners and Landlords While this may seem like an issue only affecting first-time buyers, it has significant implications for homeowners and landlords too. For Homeowners Looking to Sell: First-time buyers are the base of the housing chain. When fewer people can afford to take that first step, it slows demand for entry-level homes, which in turn makes it harder for sellers to move up the ladder. This can lead to slower sales and longer periods of uncertainty when trying to complete property transactions. For Landlords: Higher rents mean strong demand for rental properties, which can support yields. However, it can also create political and regulatory pressure for rent controls or stricter tenant protections. With average rents continuing to rise faster than wages, landlords should keep a close eye on potential government interventions. House Prices and Deposits According to the Office for National Statistics, the average UK house price reached £270,000 in July 1 . A 10 per cent deposit now requires around £27,000, a target many renters find increasingly out of reach due to high rental costs and the elevated cost of living¹. This creates a vicious circle, with tenants struggling to save while paying high rents, further delaying their entry into the housing market. Mortgage Affordability Rules Begin to Ease Even for renters who have managed to save, strict mortgage affordability rules are another obstacle. Most single buyers are limited to borrowing 4.5 times their annual salary, which can be insufficient to buy in many parts of the country 1 . Some lenders are now loosening these restrictions following regulatory changes announced by Chancellor Rachel Reeves, potentially opening the door for more buyers to secure mortgages¹. For homeowners, this could mean a broader pool of buyers and a stronger, more active market when selling a property. Renting for Longer Than Ever Perenna’s research also found that first-time buyers now spend 12.8 years renting before purchasing, up from 11.4 years a decade ago, based on the assumption they start renting at age 21 1 . Colin Bell, founder of Perenna, said 1 : “There is a time and a place for renting. While some may make the personal choice to rent in the long term, others are forced into a seemingly never-ending cycle of rising costs. Renting is ultimately money spent without return. Unlike mortgage payments, which build equity, rent offers no stake in the property and often doesn't even strengthen someone's credit profile - despite renters frequently paying more each month than they would with a mortgage 1 .” Rents Hit Record Highs The rental market is under extreme pressure, with average rents rising by 5.7 per cent in the year to August 1 : UK average monthly rent: £1,348 London: £2,253, the highest in the country North East: £745, the lowest Wales: saw the sharpest annual increase, up 7.8 per cent to £811 Scotland: up 3.5 per cent to £1,002 Ben Twomey, chief executive of Generation Rent , said 1 : “Rents continue to rise faster than wages, swallowing more and more of people’s income. We rightly have caps on our energy and water bills, but there are no protections to stop landlords from pricing us out of our homes.” For landlords, this highlights both opportunity and risk. Strong rental demand can be positive for returns, but it also increases the likelihood of political action to control rising rents. Low-Deposit Mortgages Offer Hope To help renters break free from the rental trap, some lenders are introducing low-deposit mortgage products. Newcastle Building Society, for example, has recently launched a two per cent deposit mortgage 1 . While these products could help some first-time buyers, they often come with higher interest rates and strict eligibility rules, meaning they are not suitable for everyone. Colin Bell believes more needs to be done 1 : “With house prices increasing overall, Renters could have spent their hard-earned money on an appreciating asset, but the market is failing to provide the right financial mechanisms to help lift buyers onto the ladder.” What Homeowners and Landlords Should Consider For Homeowners: The introduction of more flexible mortgage rules and low-deposit products could increase the number of active buyers in the market. This may help maintain property values and make it easier to sell your home when the time comes. For Landlords: Higher rental costs may strengthen demand for rental properties, but landlords should plan for possible regulatory changes such as rent caps or increased tenant protections. A balanced approach to rent setting will help maintain strong relationships with tenants while reducing risk. Looking Ahead The next few months will be crucial for both buyers and sellers. With new mortgage products emerging and lenders relaxing affordability criteria, more renters could finally make the move into homeownership. For homeowners and landlords, staying informed about these shifts is essential to protect investments, plan future moves, and adapt to a changing housing landscape. Source: 1. Msn.com. (2025). This is how much first-time home owners spend on rent before buying - it's risen £46,621 in a decade Available at: https://www.msn.com/en-za/news/other/this-is-how-much-first-time-home-owners-spend-on-rent-before-buying-it-s-risen-46-621-in-a-decade/ar-AA1MMICt?ocid=finance-verthp-feeds&apiversion=v2&domshim=1&noservercache=1&noservertelemetry=1&batchservertelemetry=1&renderwebcomponents=1&wcseo=1#:~:text=First%2Dtime%20buyers%20now%20spend,decade%20ago%2C%20fresh%20research%20reveals.&text=Soaring%20rents%20mean%20prospective%20buyers,to%20specialist%20mortgage%20lender%20Perenna . [Accessed 22 Sep. 2025]. ‌ ‌ Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it. There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £499 and up and this will be discussed and agreed with you at the earliest opportunity All the information in this article is correct as of the publish date 25 th September 2025. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. Please be aware that by clicking on to any of the above links you are leaving our website. Please note that neither we nor HL Partnership Limited are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.

The Bank of England base rate is currently 4.0%, having fallen from a peak of 5.25% over the past year 1 . While this downward trend has provided some relief to borrowers, the key question for homeowners and landlords is how low rates might go and when. Inflation is now 3.8%, down sharply from a peak of 11.1% in October 2022, but it remains above the Bank of England’s 2% target 2 . This means policymakers must proceed carefully, balancing the need to control inflation with the aim of supporting economic growth. What the Economists Are Saying A recent discussion by the City AM Shadow Monetary Policy Committee revealed just how uncertain the outlook remains 3 . Four of the nine economists expect that the base rate could fall to 3% by the end of 2026, offering hope of lower borrowing costs in the future. Others forecast a slower pace of cuts, suggesting only one or two further reductions, with rates settling nearer 3.5%. This difference of opinion reflects the challenge of determining the UK’s “neutral” rate – the level at which interest rates neither encourage rapid growth nor suppress it. Current market expectations suggest that this neutral rate may be higher in the UK than elsewhere, due to lingering inflationary pressures and structural factors in the economy. Key Forecasts Leading economists have provided a range of predictions 3 : Anna Leach , Chief Economist at the Institute of Directors, expects rates to stabilise between 3.5% and 3.75%, citing continued uncertainty following the pandemic and the unknown long-term impact of technological changes such as artificial intelligence. Ben Ramanauskas , Senior Research Fellow at Policy Exchange, believes rates could fall to 3% as a weakening labour market and tax pressures help bring inflation back to target more quickly than expected. Jack Meaning , Chief UK Economist at Barclays, forecasts a range of 3.0% to 3.5%, but warns that delaying rate cuts for too long could risk slowing the economy further, potentially forcing the Bank to cut more sharply later on. Jonathan Haskel , Professor at Imperial College and former member of the Bank of England’s Monetary Policy Committee, supports a 3.5% estimate, suggesting productivity gains from AI could keep rates slightly higher than in previous cycles. Julian Jessop , Independent Economist, also predicts 3.5%, based on inflation stabilising at 2% and real economic growth averaging 1.5%. Kallum Pickering , Chief Economist at Peel Hunt, takes a slightly higher view, expecting rates to settle at 3.75% due to persistent inflation pressures and strong domestic demand. Katharine Neiss , Chief European Economist at PGIM Fixed Income, sees rates falling to 3%, pointing to a cooling labour market and a lower neutral rate. Ruth Gregory , Deputy Chief UK Economist at Capital Economics, also forecasts a drop to 3% next year, highlighting how weaker employment figures could accelerate progress towards the inflation target. Vicky Pryce , Chief Economic Adviser at the Centre for Economics and Business Research, agrees that slowing inflation could give the Bank of England room to cut rates to 3%. What This Means for Homeowners and Landlords For borrowers, even small changes to the base rate can have a significant effect: Tracker and variable rate mortgages: Payments move directly in line with base rate changes, so a cut would reduce monthly costs almost immediately. Fixed-rate mortgages: Current payments remain the same until your deal ends, but the cost of your next deal depends on where lenders expect rates to be in the future. A reduction of just 1% on a £200,000 mortgage over 25 years could save more than £100 per month, making forward planning essential. Taking Action Now While rates may continue to fall gradually, the timing is uncertain. Acting early is key: Check when your mortgage deal ends and start planning well before it expires. Avoid falling onto your lender’s Standard Variable Rate (SVR), which is often several percentage points higher than fixed-rate deals. Speak to a mortgage broker with access to a comprehensive panel of lenders. They can help you decide whether to lock in a fixed rate now or wait, based on market conditions and your personal circumstances. Consider your wider financial plan, including protection such as income protection or life insurance, to ensure you can keep your home secure in the event of illness or loss of income.  Looking Ahead While there is widespread agreement that interest rates will continue to fall, economists differ on how far and how fast cuts will happen. Whether rates settle closer to 3% or 3.75%, staying informed and proactive will help you make the best decisions for your mortgage. By reviewing your mortgage early and seeking professional advice, you can avoid unnecessary costs and take advantage of falling rates when they arrive. Sources: 1. Bank of England (2025). Interest rates and Bank Rate. Available at: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate [Accessed 22 Sep. 2025] 2. BBC (2025) UK inflation: What is the rate and why are prices still rising? Available at: https://www.bbc.co.uk/news/articles/c17rgd8e9gjo [Accessed 22 Sep. 2025] 3. Mortgage Introducer (2025). Interest rates will fall to 3% – economists. Available at: https://www.mpamag.com/uk/news/general/interest-rates-will-fall-to-3-economists/550280 [Accessed 22 Sep. 2025]. Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it. There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £xx to £xxx and this will be discussed and agreed with you at the earliest opportunity All the information in this article is correct as of the publish date 25 th September 2025. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. Please be aware that by clicking on to any of the above links you are leaving our website. Please note that neither we nor HL Partnership Limited are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.