The first-time buyer market has proven resilient this year, despite historic headwinds, analysis from Yorkshire Building Society has revealed.
In partnership with business consultancy CACI, the society’s research found that first-time buyers make up a higher proportion of the home purchase market than at any time since the business consultancy began measuring such market statistics in 2016.
The mutual has seen overall mortgage applications rise by almost a quarter in 2024, despite forecasts from UK Finance that gross lending would be lower in 2024 than it was in 2023.
In its November 2023 figures, the trade body suggested gross lending would fall from £226bn to £215bn this year, but actual activity has challenged that forecast so far.
In fact, the data suggested the value of mortgage applications year-to-date was 15% higher than the equivalent period in 2023, while first-time buyer applications grew by 33% in the same period.
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.”
Average rates in the mortgage market fell by around 1.25% since their July 2023 peak of around 6.5%, but increased again recently in response to economic developments in the UK and elsewhere.
Meanwhile, latest Office for National Statistics (ONS) data shows that average rents rose by 9% in the 12 months to February 2024, the highest annual increase since they began compiling this data in 2015.
The average monthly rental figure in England was found to be £1,276, yet the average monthly mortgage payment for a first-time buyer was £1,139.
Duncombe added: “When you consider figures like these, it’s not hard to understand why first-time buyers are increasingly aiming at home ownership 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.”
