First-time buyer numbers fall 22% as rates rise and housing availability bites

Nick Cheek
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Nick Cheek

Fewer first-time buyers have entered the market this year, held back by high interest rates, a lower availability of mortgage deals and inflationary pressures making it tougher to save for a deposit.

Between January and August, the number of first-time buyers fell to 186,015, 22% down on the same period last year. Apart from a dip in first-time buyer activity at the start of the pandemic in 2020, first-time buyer number have ranged between 210,000 and 270,000 since 2015.

Despite the decline in those setting foot on the bottom of the property ladder, first-time buyers still account for 53% of all home loans agreed in the first eight months of the year, a similar proportion to last year due to a slow down in wider market activity.

Strong growth in earnings, however, has meant that buyers are having to stretch themselves less to afford a home. First-time buyers are now spending 5.1 times their wages to afford a home compared to 5.8 time in June last year.

The analysis by Halifax found that the average house price has dipped by 2% year-on-year to £288,030 while the average deposit has fallen by 12% to £54,116.

Regional differences

All regions have a suffered a drop off in first-time buyer numbers this year but Scotland, which saw its numbers fall by 14%, is the most affordable place to live. Nine of the ten most affordable local authority districts fell within the Scottish border. The exception was Northumberland.

Unsurprising, London districts dominated nine of the ten least affordable places for first-time buyers to live joined by Hertsmere in the East of England.

The average age of a first-time buyer is 32 years old, rising by two years over the past decade.

Deposit a ‘significant’ hurdle

Kim Kinnaird, director of Halifax Mortgages, said: “While lenders are ready to help people get on the property ladder, the growth in house prices over the past decade means raising a suitable deposit remains a significant hurdle.

“The expected further fall in house prices this year alongside stronger income growth may somewhat offset higher interest rates, which will be welcome news to many. Further, there are some areas which continue to be great options for first-time buyers. The average cost of a first property in Scotland, for example, comes in at almost £100,000 less than the UK average.”