Property Blog and News / Key financial factors to understand as a first time buyer

Key financial factors to understand as a first time buyer

6 October 2023


Natasha Afxentiou
Senior PR & Content Executive

Buying a home is one of the most significant financial investments that a person will make in their lifetime, with key factors related to the transaction likely to leave a lasting impact on your finances. 

As a first time buyer, it’s important to be aware of the impact your choices will have on your ability to secure your dream property and on your future finances once you’ve exchanged. So, to help you better understand the market you’re about to enter, the second episode of our home moving podcast, OnTheMove, explores the financial terms and economic factors associated with buying a home.  

Below, we’ve compiled a simple list of key terms and explanations to support you when preparing to navigate your first property purchase. 

1. Interest rate 

Interest rates come into play when you have savings accounts, and you also have interest rates when you take out any line of credit. An interest rate is a measure of how much money you’ll either have to pay on top of the money that you’ve borrowed, or if you’re saving, the interest rate is how much the bank or financial institution will pay you for saving. 

When it comes to buying a home, we’re talking about borrowing and taking out a mortgage. Therefore, in the context of purchasing a property, the interest rate is how much the lender will actually charge you on top of whatever you borrowed that you have to repay when you come to pay back your mortgage. 

Some interest rates on mortgage products are fixed for a period of time. For example, you might see a five year fixed mortgage available to you which means it has a certain interest rate, let’s say 5% for example. In this case, you’d know that interest rate isn’t going to change; it’s going to be fixed for that period of time. On the other hand, you can also get a variable rate mortgage which means the interest rate on your mortgage, and therefore the amount you’ll pay back in your repayments, can change over time. 

When it comes to securing your mortgage, it’s essential to speak to a mortgage adviser and you need to factor in your monthly costs and what you can afford to borrow up to while also paying close attention to interest rates whether you’re a first time buyer or a seasoned mover.   

2. APR

When taking out any line of credit, APR stands for Annual Percentage Rate.

For many people, their first introduction to APR comes when taking out their first credit card. In this context, you might see 29.9% APR for example, and this is how much money is going to be charged on top of the line of credit that you’re taking out, providing that you don’t pay it back. Therefore, with the example of a credit card, if you didn’t pay it back in full every month, the APR figure is how much you’d be charged on an annual percentage over the course of that year.

Similarly, outside the context of a credit card, APR is the annual percentage rate that you’ll be charged on top of whatever line of credit you’ve taken out. 

3. Inflation

We hear a lot of the time that interest rates rise to help calm down inflation, but what is inflation?

Inflation is the rate at which the costs of goods and services increase. With this in mind, interest rates go up because the inflation rate is the rate at which goods and services in our economy are rising and how quickly they’re rising. Therefore, the higher inflation rate, the faster that these costs are rising.

The Bank of England’s target is to keep inflation around 2%. When interest rates rise and you come to borrow money, like a loan for example, it’ll cost you more to repay those borrowings.

When the costs of goods and services become more expensive, we may be encouraged to buy less and save more. This reduces the demand for purchasing things in our economy.

While it costs more to repay your loan when interest rates rise, you can actually also get more from your savings because as mentioned above, when it comes to saving, the interest rate is how much the bank or financial institution will pay you for saving your money.

Therefore, when inflation is high and interest rates rise, instead of spending money, you may put it away in savings. As a result, because there’s less demand for goods and services with consumers not spending as much, the rate at which prices of items in our economy are rising tends to slow down.

For more insights for first time movers, you can listen to the full second episode of our OnTheMove podcast here, or on your regular podcast streaming service including Spotify and Apple Podcasts

Content provided by is for information purposes only. Independent and professional advice should be taken before buying, selling, letting or renting property, or buying financial products.