First-time buyers no longer drive the market, as home movers take advantage

Christina Hoghton
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Christina Hoghton

The housing market remains strong but first-time buyers are finding it increasingly difficult to secure mortgage funding

The numbers of existing homeowners moving home will overtake first-time buyers by the end of the year, said Zoopla, as tighter lending criteria makes it harder to get a foot on the housing ladder.

The property portal noted that first-time buyers have long been the driving force in the UK mortgage market, accounting for the largest share of lending, but this is set to change as a result of the fallout from the Covid-19 pandemic.

Lenders began to limit the availability of products for borrowers with a low deposit from June – and these borrowers are more likely to be first-time buyers. Combined with tighter criteria limiting the amount they are able to borrow, it’s quickly become much harder for first-timers to secure the mortgage they need. Demand from first-time buyers has now fallen for the last two months said Zoopla.

Existing homeowners often have significant equity in their home, which opens up more products at more competitive rates, plus lenders are more flexible on criteria if you have a substantial deposit.

Zoopla said that demand from existing homeowners is now at 37% above pre-Covid levels as they search for more space and bigger gardens. In turn this stimulates more supply which is coming to the market at higher prices.

Meanwhile, house prices are up 2.6% year on year, up from 1% a year ago, with sales agreed running 3% above those achieved in 2019.

Richard Donnell, research and insight director at Zoopla, said: “Housing market conditions remain strong as new restrictions are introduced to control the spread of COVID. These changes are likely to continue to support housing demand in the near term as the importance of the home grows. However, the housing market will not remain immune to the impacts of weaker economic growth and rising unemployment.

“A change in the mix of buyers is supporting market conditions with sustained demand from equity rich existing owners seeking more space and a change in location.

“In contrast, first-time buyer demand is weakening. They’ve been a driving force of housing sales over the last decade. They remain a key buyer group but lower availability of higher loan to value mortgages and increased movement by existing home-owners means a shift in the mix of home buyers into 2021.”