In a bid to escape the heated rental market, first-time buyers have dominated the sales market this year, making up a record third of all purchasers. This unprecedented move comes despite a limited package of government support measures.
Last year, 29% of homes in Great Britain were bought by a first-time buyer, which set the previous milestone. However, improving affordability conditions have helped unlock moves from those who couldn’t afford to buy last year.
Over the last decade, the share of homes bought by a first-time buyer in Great Britain has almost doubled, from 17% in 2014 to 33% this year. The return of high loan-to-value (LTV) lending alongside low-interest rates throughout much of that period has helped more people become homeowners. This has been coupled with a clampdown on buy-to-let, reducing demand from landlords, which in turn has often come at the expense of renters.
Falling mortgage rates over the last six months have particularly helped unlock moves from first-time buyers in the most unaffordable areas of the country that were hardest hit last year. Consequently, first-time buyer purchases have risen the most in the South of England, where buyers tend to stretch themselves the most.
London saw the biggest increase. First-time buyers purchased a record 50% of all homes sold in the capital so far this year, up from 41% in 2023 and 28% a decade ago.
The South East, the second most expensive region in the country, also saw a 9% year-on-year increase. Here, first-time buyers purchased 34% of homes sold in the region this year, more than double the proportion (13%) in 2014.
Wales and the North East were the only regions where the share of first-time buyer purchases fell since last year. These are some of the most affordable areas to buy a home in Great Britain, therefore improving affordability conditions have had a smaller impact.
Overall, there were 19 local authorities across Great Britain where first-time buyers made up over half of all buyers this year. Fifteen of these were in the South of England, seven of which were in London. A decade ago, Slough was the only local authority where more than half of homes were bought by a first-time buyer.
Even though affordability has improved since last year, higher mortgage rates continue to limit how much first-time buyers can borrow. Consequently, the preference for smaller homes has become evident, as for the first time since 2011, over half (51%) of first-time buyers opted for properties with one or two bedrooms. Last year, 49% bought two-bed homes or smaller, while the majority of new homeowners bought a larger home.
If first-time buyer purchases continue at this rate, we’re set to see 363,000 new homeowners across Great Britain this year. This would mark the highest number since at least 2009.
However, the affordability squeeze means that on current trends first-time buyers will collectively spend £3bn less on their first homes than in 2021 while paying £796m more in mortgage repayments during their first year of ownership due to higher rates. A typical first-time buyer with a 90% LTV mortgage over 30 years will pay £13,977 on year one mortgage repayments in 2024, £1,524 more than they would have paid in 2021 for a larger home.
Consequently, the market continues to be dominated by those who can afford to buy, rather than those who want to. And the pickup in first-time buyers this year is in part, making up for the lost moves in 2023.
Longer-term, in a similar fashion to post-2008 when the removal of high loan-to-value lending put purchases out of reach for many, unless rates fall markedly, homeownership will be restricted to the most affluent households, reversing the decade-long increase in first-time buyer purchases.
