First-time buyers are now the main protagonists in the UK housing market, significantly influencing trends and transaction volumes. According to recent data from property experts at reallymoving, the participation of these newcomers in the market has grown considerably, now representing 60% of all buyers, up from 54% in April 2023. This peak was even higher in December, when first-time buyers made up 63% of the market, though it has since slightly decreased. Despite various financial hurdles and a tight mortgage landscape, this group has consistently performed above the five-year average, showcasing remarkable resilience and determination.
Challenges and Support Systems
The journey to homeownership is fraught with challenges for first-time buyers, including high mortgage rates and limited governmental support. However, the driving force behind their market dominance is the increasingly unaffordable rental sector. With rents reaching record highs and fierce competition for rental properties, many are finding it more feasible to invest in buying a home. A crucial lifeline for many in this group is the financial support from the ‘Bank of Mum and Dad,’ which aids over a third of first-time buyers in accumulating the necessary deposits. This family assistance has become a normalised aspect of entering the housing market.
On average, a single first-time buyer would need approximately 6.5 years to save for a 10% deposit, which typically amounts to £25,554, covering essential expenses such as conveyancing, surveying, and moving costs. In London, the saving period doubles, highlighting the regional disparities within the housing market.
Downsizing Trend Takes a Dip
Conversely, the market for downsizers has seen a decline. After a surge in activity during 2022 and into 2023—spurred by high energy costs and the broader cost-of-living crisis—the proportion of downsizers has fallen sharply. From a strong presence of 35% in September 2023, they now account for just 24% of the market as of March 2024, reaching a more than two-year low. This drop can be attributed to eased inflation, a tighter housing supply making it harder to find suitable smaller properties, and the significant costs involved in moving. Speculations around potential Stamp Duty relief for downsizers have also led many to postpone their moving plans.
Mortgage Markets
The situation for mortgaged home purchases is improving. After a period where cash purchases spiked due to rising interest rates, the proportion of buyers opting for mortgages has been climbing steadily. From 72% in July 2023, it escalated to 83% by March 2024—the highest in nearly four years. This shift indicates a growing adaptation to higher mortgage rates and increased flexibility from lenders who are now offering longer-term loans and a wider array of mortgage products. According to Moneyfacts, the choice of residential mortgage products is at its highest in over 16 years, suggesting a robust recovery in this segment of the market.
Market Insights from Industry Experts
Rob Houghton, CEO of reallymoving, notes that despite a current 13% dip in overall market activity from the long-term average—primarily due to mortgage rate uncertainties—there is considerable latent demand. He anticipates a market rebound once the base rates begin to fall. Houghton remains optimistic about the impact of first-time buyers: “It’s encouraging to see that First Time Buyers are dominating activity, against the odds finding a way to get onto the housing ladder and begin their home ownership journey. Movement at the lower end of the market enables upsizers to move, which in turn will help boost downsizer activity by increasing the volume of properties available for them to buy.”