First-time buyer numbers surge in 2024

First-time buyers are a driving force in the housing market this year, making up a record one-third (33%) of all purchases in Great Britain during the first quarter, Hamptons reveals.

This marks a significant jump from 29% in 2023, the previous high point.

Lower mortgage rates compared to last year have improved affordability, enticing many who couldn’t buy before.

Aneisha Beveridge, the head of research at Hamptons, said: “Escaping the high rents is a major motivator.

“This record share comes despite limited government support. To manage affordability, many are compromising on property size.”

Return of high loan-to-value (LTV) mortgages

The return of high loan-to-value (LTV) mortgages alongside historically low interest rates in recent years has helped many tenants become homeowners.

The recent mortgage rate drop has been particularly helpful for first-time buyers in previously unaffordable areas most impacted last year.

As a result, the rise is most prominent in the South of England, where buyers tend to stretch their budgets further.

London witnessed the biggest increase, with a record 50% of all property sales going to first-time buyers in 2024.

This is a significant 9% rise from 2023’s 41% and a huge jump from 28% a decade ago.

London’s first-time buyers to spend an average of £422,660

Lower interest rates and rising incomes have enabled London’s first-time buyers to spend an average of £422,660 on their new homes, 5% more than last year.

However, higher borrowing costs compared to pre-2022 meant they spent £108,710 less than in 2020, reflecting the impact of interest rates on borrowing power.

London’s soaring rents in recent years further fuelled the desire for homeownership among some renters.

The South East, the second-most expensive region, also saw a 9% year-on-year increase, with first-time buyers accounting for 34% of sales.

This is more than double the 13% recorded in 2014.

Only regions with a decline in first-time buyer activity

Wales and the North East were the only regions with a decline in first-time buyer activity compared to last year which is probably down to affordability issues.

Overall, 19 local authorities across Great Britain have seen first-time buyers exceed half of all purchases this year.

Notably, 15 of these were in the South of England, with seven in London itself.

Just 10 years ago, Slough was the only such authority to see lots of house buying activity.

High mortgage rates restrict borrowing power

Despite some improvement, affordability remains a concern as high mortgage rates restrict borrowing power for first-time buyers, leading them towards smaller properties.

For the first time since 2011, more than half (51%) opted for one or two-bedroom homes, compared to 49% who purchased two-bedroom homes or smaller last year.

First-time buyer purchases of flats also rose to 28% in 2024, up from a low of 24% in 2022, when the demand for larger spaces post-pandemic peaked.

At this pace, 2024 could see a record-breaking 363,000 new homeowners across Great Britain.

However, the affordability squeeze means they might spend £3 billion less on their first homes compared to 2021, while paying an extra £796 million in mortgage repayments in their first year due to higher rates.

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

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