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First-time buyer activity expected to grow and increase market share

  • 30/05/2024
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First-time buyer activity expected to grow and increase market share
First-time buyers are predicted to make up a higher proportion of the purchase market, with activity expected to grow, a report has found.

According to research from Yorkshire Building Society and business consultancy CACI, first-time buyers make up a higher proportion of the home purchase market than at any other time since the firm started measuring in 2016.

The report stated that Yorkshire Building Society’s overall mortgage applications have risen by around a quarter in 2024, going against UK Finance’s expectations that gross lending would fall in 2024.

Yorkshire Building Society’s analysis of CACI’s data indicated that the value of mortgage applications so far this year is 15% up on the same period last year, and first-time buyer applications have jumped by a third, the fastest growing group.

Analysis of CACI data also shows that activity among first-time buyers has jumped by a quarter in the past eight years, making up around 40% of mortgage applications in the market on average.

The report added that the proportion of mortgage applications by first-time buyers overtook homemovers for the first time in January.

Jeremy Duncombe, director of mortgage distribution at Yorkshire Building Society, said: “Things have changed substantially since UK Finance issued its forecasts last November. The picture is a fast-changing one, and despite continued inflationary pressures keeping interest rates higher than hoped, coupled with ongoing volatility caused by economic and political uncertainty, consumer confidence seems to be returning.

“While there is continued uncertainty and it’s therefore important to be cautious, the year has got off to a far better start than predicted, with housing market activity on the rise. House prices are predicted to settle and maybe even increase moderately throughout the rest of the year, with more stable mortgage rates resulting in more buyers deciding to dip their toes back in.”

He added: “The increase in first-time purchaser numbers could be attributed to a number of factors. We know from our own research that many are making life-changing decisions to prioritise homeownership over other milestones like starting a family.

“High rental costs are making the prospect of owning a property more appealing, and many may feel they’re just not prepared to put off buying any more in the hope rates might reduce.”


Rising rents fuelling first-time buyers’ drive for housing

The report found that average rates in the mortgage industry have decreased by 1.25% since their July 2023 peak of 6.5%, but have risen slightly recently.

Office for National Statistics (ONS) figures have also shown that average rents have jumped by 9% in the 12 months to February, which is the highest since data started being collected in 2015.

Duncombe continued: “When you consider figures like these, it’s not hard to understand why first-time buyers are increasingly aiming at homeownership despite the higher-interest-rate environment. Our own experience with our recent £5k Deposit Mortgage shows the strength of demand from first-time buyers to get on the housing ladder.

“While purchasing a home is clearly an emotive choice, it’s also a big financial commitment. Results from our Home Truths report, published last autumn, showed that, for over half of respondents, not wasting money on rent was the main driver for buying their own place.”

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