UK First-Time Buyer Numbers Fall 20%

The UK has witnessed a notable decline of over 20% in the number of first-time homebuyers, reflecting the growing challenges posed by increased mortgage costs. This trend underscores the heightened demand for homes in need of renovation, primarily due to their affordability.

According to Halifax, there has been a 22% drop in the count of first-time homebuyers between January and August, compared to the same period last year. Remarkably, first-time buyers still represent a significant portion, making up 53% of all home loans granted in the first eight months of this year, a figure similar to the previous year's 52%.

Kim Kinnaird, director of Halifax Mortgages, noted that the average age of first-time homebuyers has risen by two years over the past decade, now averaging 32 years.

An independent report from Rightmove, analyzing over 600,000 properties listed on the platform, reveals that properties requiring renovation, often referred to as "fixer uppers," are the most sought-after among buyers. These properties are priced 8% lower, amounting to £29,000 less than the average property for sale. Conversely, those in search of newly refurbished homes are paying a premium of 19%, nearly £70,000 more.

Properties that have undergone renovation, boasting new boilers, double glazing, loft conversions, and storage space, are generating the highest interest. Additionally, chain-free homes, properties with gardens, and those located near transportation hubs are also highly sought after. For renters, properties equipped with double glazing, smart technology, and proximity to transportation stations are the most desirable.

The Bank of England, in its attempt to control high inflation, raised interest rates 14 times since the end of 2021, reaching 5.25%, before recently pausing. This pause has raised hopes that the peak in borrowing costs has been reached.

The surge in mortgage costs has had a significant impact, with the south-east experiencing the most substantial decline in first-time homebuyers so far this year, down 25%. London and East Anglia followed closely, both with a 24% decline, according to Halifax.

Amidst soaring mortgage costs, Halifax notes a strong demand for cheaper, renovation-needed homes.

However, robust income growth in recent months has caused the house price-to-income ratio for first-time buyers to decrease from 5.8 in June last year to 5.1. This means that housing prices for first-time buyers are at their most affordable since June 2020.

The average deposit for a first home has now risen to £54,116, constituting 19% of the property price. In comparison, this was £31,060 in 2013, representing 21% of the property purchase price at the time. Notably, first-time buyers in London face the highest deposit, averaging £113,078, while those in the north-east make the lowest average deposit of £29,184.

Kim Kinnaird, Mortgages Director at Halifax commented on the situation, stating, "Getting the keys to your first home is a significant milestone in anyone's life. The expected further fall in house prices this year—alongside stronger income growth—may somewhat offset higher interest rates, which will be welcome news to many. Furthermore, some areas continue to be excellent options for first-time buyers; for example, the average cost of a first property in Scotland is £100,000 less than the UK average, at £187,215 compared to the UK's £293,464 average."

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