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First Time Buyers take advantage of slowly-reducing rates

Slowly reducing mortgage rates this year have led to first-time buyers accounting for a record 33% of all buyers across Britain in Q1 2024, says lettings agency Hamptons.

This figure has risen from 29% in 2023, which set the previous milestone, as improved affordability conditions have helped unlock moves from those who couldn’t afford to buy last year.

Over the last decade, the share of homes bought by a first-time buyer in Britain has doubled, from 17% in 2014.  The return of high loan-to-value lending alongside low-interest rates throughout much of that period has helped more people become homeowners.


This has been coupled with a clampdown on buy-to-let, reducing demand from landlords, but has often come at the expense of renters.

Falling mortgage rates over the last six months have particularly helped unlock moves from first-time buyers in the most unaffordable areas of the country that were hardest hit last year.  Consequently, first-time buyer purchases have risen the most in the South of England, where buyers tend to stretch themselves the most.

London saw the biggest increase.  First-time buyers purchased a record 50% of all homes sold in the capital so far this year.  This marked a 9% uplift from the 41% recorded in 2023 and is up from 28% a decade ago.

Lower mortgage rates and rising real incomes meant that first-time buyers spent an average of £422,660 on their new home in the capital, some 5% or £19,000 more than last year.  However, high borrowing costs compared to pre-2022 meant that the typical London first-time buyer spent £108,710 less than they did in 2020 when mortgage rates were more affordable, boosting their ability to borrow more.

London has also seen some of the biggest rent rises over the last few years, encouraging more discretionary renters to become homeowners.

The South East, the second most expensive region in the country, also saw a 9% year-on-year increase in the share of homes bought by first-time buyers (chart 2).  They purchased 34% of homes sold in the region this year, more than double the proportion (13%) in 2014.

Wales and the North East were the only regions where the share of first-time buyer purchases fell since last year.  These are some of the most affordable areas to buy a home in Great Britain, so improving affordability conditions have had a smaller impact.

Overall, there were 19 local authorities across Great Britain where first-time buyers made up over half of all buyers this year.  Fifteen of these were in the South of England, seven of which were in London.  A decade ago, Slough was the only local authority where over half of homes were bought by a first-time buyer.

Even though affordability has improved, higher mortgage rates continue to limit how much first-time buyers can borrow.  Consequently, and in a bid to escape the costly rental market, first-time buyers are purchasing smaller homes.

For the first time since 2011, more than half (51%) of first-time buyers purchased a home with one or two bedrooms.  Last year, 49% bought two-bed homes or smaller, while the majority of new homeowners bought a larger home.  Similarly, 28% of first-time buyers purchased a flat this year, up from a recent low of 24% in 2022 when the post-Covid race for space was in full swing.                                                         

If first-time buyer purchases continue at this rate, Hamptons says we’re set to see 363,000 new homeowners across Britain this year.  This would mark the highest number since at least 2009.                                                                                                    

However, the affordability squeeze means that on current trends first-time buyers will collectively spend £3 billion less on their first homes than in 2021 while paying £796m more in mortgage repayments during their first year of ownership due to higher rates.

A typical first-time buyer with a 90% LTV mortgage over 30 years will pay £13,977 on year one mortgage repayments in 2024, £1,524 more than they would have paid in 2021 for a larger home.


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