For first-time buyers, there has been the recent promise of some ‘big ticket’ incentives from the government in March’s Budget, with the rumour mill looking at action on stamp duty – potentially being abolished, though this seems unlikely – plus something to fill the hole left by Help to Buy ending.
On that point, the government would be better positioned to support industry solutions in this area, such as Deposit Unlock, which recently added another lender, Bluestone Mortgages, to its ranks and should be the go-to Scheme with no need for any further taxpayer money in this area.
If the government does decide to look at stamp duty cuts/threshold changes again then this is only likely to be a major incentive in high-price areas given first-time buyers don’t currently pay any stamp duty below £425k anyway.
Of course, if it does decide to go ‘nuclear’ on stamp duty then this is likely to act as a major incentive within the wider housing market, and we could see increased purchase demand and more people willing to look at both their purchase/sale options.
Can first-time buyers turn a corner in 2024?
There’s no doubting purchase activity amongst home movers has fallen back, and first-time buyers have been the predominant buyers over the last two years. Indeed, UK Finance statistics show home movers haven’t outnumbered first-time buyers in terms of mortgage advances since Q2 2021, and in every quarter of 2022 and 2023 up to Q3, it is first-time buyers who have been the dominant buying demographic.
This despite it being incredibly challenging times for first-timers particularly in terms of access to housing supply, but also clearly in terms of meeting affordability levels in a higher interest rate environment.
One wonders if 2024 will see something of a corner turned in terms of interest rate levels, given we have seen no changes to base rate in recent months, and swaps have dropped fairly substantially as well, in expectation of BBR being cut during the year ahead.
As I write swaps are now tracking well below a year ago, and there is an anticipation throughout the market that we will see a continuation of the product rate cuts which were so prevalent towards the end of the year.
Whether that fully translates to the high LTV product space remains to be seen as, up until now, the biggest rate cuts have (unsurprisingly) been at the lower LTV levels. However, with predictions of still fairly subdued lending levels again in 2024, it would not be surprising to see lenders looking to start the year on the ‘B’ of the ‘BANG’ in order to get ahead of the curve and to fill pipelines as quickly as possible.
In the high LTV product space, we did see a growing number of product options in the last quarter of 2023 and rates did come down. Coupled with lower house prices, falling interest rates will give first-timers a much more positive environment within which to purchase, and a much greater chance of getting on the ladder providing they have the supply to choose from.
One final note on 2024 and it, of course, comes in the form of the anticipated General Election – will it be May or November? It can’t be next January, surely? Certainly an early Budget points the way towards an earlier GE, and there’s no doubting housing policy will figure heavily within the manifestos of all parties, but particularly the Conservatives and Labour.
The former will feel they need to make a big pitch to younger voters who may feel completely ostracised in terms of their ongoing ability to get on the ladder currently, while Labour have already pledged to build 1.5 million affordable homes in the next Parliament should they win.
The quest for the hearts and minds of would be first-time buyers will figure significantly in an election campaign, and it will be interesting to see how these land with a generation who have definitely not had the advantages of their parents or grandparents when it comes to buying a first home.
