According to Yorkshire Building Society (YBS), the number of first-time buyer home purchases increased by nearly 13.8% in 2024, nearing historic highs after dropping to a decade low in 2023.
Easing affordability due to lower inflation and interest rates contributed to this rebound, though YBS said further support would be necessary as Stamp Duty changes poses challenges.
Max Shepherd, group economist at Yorkshire Building Society, said that positive developments like successive falls in the Bank Base Rate have improved affordability for first-time buyers.
He added that Government changes to Stamp Duty Land Tax rules could lead to a rush of completions in the first quarter, as buyers seek to secure properties before costs increase on 1st April.
Once the change is implemented, it may discourage existing homeowners from selling, further inflating house prices.
Shepherd said: “While the trend is no doubt positive, the Stamp Duty change announced in October’s Budget and ongoing geopolitical headwinds represent further risks to keep an eye on.
“The reduction in the threshold at which Stamp Duty Land Tax is paid, to £300,000, means that anyone buying a £500,000 home would pay an extra £10,000, and £25,000 if their property is worth over £500,000.
“Previously, properties up to £425,000 in value were exempt.”
Shepherd added: “Although buyers in regions like the North are likely to be unaffected by the change, higher house prices in the south could see buyers there caught in this trap.”
YBS predicted around 330,000 first-time buyer mortgage transactions for 2024, up from 290,000 in 2023, which was the lowest figure since 2013.
This decline in 2023 was attributed to the cost-of-living crisis, higher interest rates, and rising house prices.
The highest number of annual first-time buyer transactions in the last 20 years occurred in 2021, reaching 400,000 due to Government support, changes in working habits, and low borrowing costs.
Overall house purchase activity was projected to rise by 10% in 2024, with Yorkshire Building Society estimating 1.1 million transactions, compared to one million in 2023.
First-time buyers were expected to account for 54% of purchasing activity, similar to the previous year.
Shepherd said: “The base rate cuts during 2024 are one of the factors that have contributed to increased first-time buyer confidence, though caution is needed when it comes to any hopes they might see materially lower mortgage rates in 2025.
“The market is expecting three base rate cuts this year, which have been priced in by the market already, so I don’t think we’re likely to see average rates fall much below 4% and therefore anyone thinking of buying should probably base their planning around that.”
He added: “Economic factors like real earnings growth, the introduction of the new minimum wage and the fact unemployment is still low, are contributing to the increase in confidence, which is good to see, but there are a lot of variables at play.”
