The numbers of first-time buyers reached an estimated 353,436 in 2019, the highest level since 2007, according to the Yorkshire Building Society (YBS). First-time buyers have been out in force in 2019, taking advantage of falling prices and rising wages.
Despite a distinct lack of growth over the last 12 months, the overall trend is that the figures are slowly approaching those of the pre-financial crisis.
Furthermore, this is the fifth time in six years that the number of people buying their first home with a mortgage has exceeded 300,000. The data show that nearly twice as many first-time buyers obtained a mortgage in 2019 as at the start of the financial crisis in 2008, when the figure was 191,040.
Those entering the property market now account for 51% of all homes purchased with a mortgage in 2019, whereas in 2008 the figure was only 38%. YBS has based its analysis on market-wide first-time buyer data to October 2019, with November and December estimated by the society.
Demand continues to exceed supply
London is the most expensive region for homes purchased by first-time buyers, with an average price of £415,618, followed by the South East at £264,097. However, they are the most popular regions for first-time buyers, accounting for 12% and 20% of sales, respectively, which is significantly higher than in other areas.
Yet more striking is the fact that first-time buyers make up 60% of all house purchases using a mortgage in London even though the average deposit paid is £131,000.
Nitesh Patel, YBS strategic economist, has said that first-time buyers represent more than half of all homes purchased with a mortgage. This means that the first-time buyer share of the mortgage market is at its highest since 1995, when this group bought 53% of all mortgage-financed homes.
However, the twin blessings of stagnating property prices and rising wages could soon be over. The price of starter homes is rising three times faster than the wider market, as demand continues to exceed supply. First-time buyer numbers, Patel added, may now level off as property prices have grown more quickly than wages and salaries over the last 12 years.
This means that larger deposits are needed to climb on to the property ladder, resulting in challenges and obstacles to home ownership, which are most noticeable in London and the South East.
Government schemes popular
In recent years, Patel continued, first-time buyers have been supported by robust competition driving down mortgage rates to near-record lows, thereby making borrowing more available. More mortgage lenders are now offering 95% loan-to-value mortgages, thereby reducing the need for a larger deposit.
In addition, Patel concluded, home loans with terms of up to 40 years are becoming increasingly popular as first-time buyers seek to lower their monthly mortgage repayments.
In particular, government schemes such as Stamp Duty relief, Help to Buy equity loans and Help to Buy ISAs have rocketed in popularity in recent months. First-time buyers are rushing to take advantage of the Help To Buy scheme before it closes its doors in 2023.
This combination of factors has made buying a home more attainable in recent years, and has seen the first-time buyer market recover from the financial crisis and perform better than other sectors, such as the home-moving and buy-to-let markets.
However, as these figures show, the market may now have reached a peak for the time being and buying your first home still remains challenging for many.