The First Direct First-Time Buyer Snapshot based on data from CACI showed that despite the yearly growth, the value of applications had declined 11 per cent from September’s £6bn.
First Direct said although there had been a monthly drop, the annual rise in value a year on from the fallout of the September 2022 mini Budget showed the market was stabilising.
In contrast, the total value of the mortgage market was £16.5bn in October which was an 11 per cent drop on the year before. First Direct said this was mostly due to the decline in remortgage activity.
A possible increase in activity ahead
Liam O’Hara, head of mortgages at First Direct, said: “After reaching its peak in June, market volatility sent the first-time buyer market on a downward trajectory for two months, before showing signs of recovery in September. Figures are down in October, but there is still an indication that the market is stabilising, even though many first-time buyers will still be facing challenges around affordability and saving for a deposit.
“Looking at seasonal trends over the last few years, Q4 is typically one of the quieter quarters of the year, with early spring through to summer the most popular period for mortgage activity. The first-time buyer market being up year-on-year is a positive sign, even if the numbers remain subdued compared to the highs of 2022. With many lenders including First Direct reducing rates in November, we might see an increase in activity as a result.”
Average loan size at highest since summer
The average loan size for a first-time buyer mortgage reached £202,176 in October, which was the first time since June this had exceeded £200,000.
This was an annual rise of 2.6 per cent.
Average loan sizes rose across the whole market, with home mover and remortgage borrowing amounts reaching their highest since June. Yearly increases were also recorded.
O’Hara said: “The factors that influence average loan values are numerous, but an increase can be a positive sign that affordability is increasing.
“Several house price indices show that house prices are on a soft downwards trajectory, so an emerging counter-trend could also suggest more first-time buyers are buying properties with smaller deposits as those higher LTV rates start to come down.”
FTBs taking remortgage market share
The data showed that while the first-time buyer and home mover markets had grown, remortgage activity had contracted. In August and September, the remortgage market made up 29 per cent of all applications.
This was lower than its usual share of the market, which is typically around a third, and First Direct said the remortgage market did not tend to go below 30 per cent of activity.
The last time this happened was June 2021.
There were signs of recovery by October, as remortgages accounted for 33 per cent of the market’s volume. First-time buyers remained the largest segment with a 35 per cent share and home movers made up 32 per cent.
While an annual growth in value and volume was recorded across the first-time buyer and home mover markets, remortgage applications declined by 37 per cent in October.
First Direct said this was probably because the remortgage market was less impacted by the mini Budget’s aftermath.
O’Hara said: “Remortgage application volumes are usually quite consistent, even in times of market volatility. This is because unlike property buyers and first-time buyers, people needing to remortgage have less freedom to delay or pause plans.
“We saw this after the mini Budget last year: remortgage applications dropped by 22 per cent in October 2022 compared to the month before, whereas first-time buyers and home mover applications dipped by nearly half.
“What we’re now seeing is a big surge in people choosing to stay put, which is part of the reason why this segment is down. Some want to wait and see what the mortgage market has in store in the next few months before committing to a fixed rate.”