Data from Rightmove shows how an interest rate rise today, when the Bank of England meets, might effectively boost demand in the private rental sector.

The portal says that if – as some analysts predict – the BoE today increases base rate by 0.5 pert cent, potential first-time buyers would see monthly mortgage payments increase to an average of 40 per cent of their gross salary, a level not seen since 2012. 

The average monthly mortgage payment for new first-time buyers would increase to over £1,000. This would almost inevitably mean many would have to rent instead.

If the rate rises today by 0.25 per cent the average monthly mortgage payment for new first-time buyers would increase to £1,003 nationally, and if it rises by 0.5 per cent it would increase to £1,030.

A 10 per cent deposit on an average first-time buyer type home is now £22,494, which is 57 per cent higher than 10 years ago – by contrast, the latest data shows average gross monthly salaries have increased by 31 per cent in the same period. 

Tim Bannister from Rightmove says: “First-time buyers trying to get onto the ladder are currently facing average monthly mortgage payments that are 20 per cent higher than the start of the year due to rising interest rates and asking prices, and that’s assuming they’ve been able to overcome the hurdles to raise a large enough deposit. 

“With each jump in interest rates, home-owners are contributing approximately one per cent extra of their gross salary on average towards a mortgage.

“Average mortgage rates for a two-year fix are just over 3.0 per cent compared to nearly 6.0 per cent 10 years ago, so they are still historically low. However, as they creep upwards, the large number of first-time buyers looking to move this year may look for some financial certainty by locking in longer mortgage terms. 

“Demand for first-time buyer type homes is up 35 per cent compared to the last ‘normal’ market of 2019, which shows a high motivation to move from first-time buyers despite the challenges.”