Surge In First Time Buyers Won’t Last, According to Lender

An analysis by the Yorkshire Building Society has predicted that the number of sales to first-time buyers has surpassed 400,000 in 2021, for the first time since the financial crisis of 2007-08.

What Mortgage reports that despite uncertainties caused by the lockdowns of 2021, the latest estimates from the mortgage provider suggest that the number of first-time buyer transactions reached 408,379 during the year which is a 35 per cent increase on 2020.

According to the study, first-time buyers now represent 50 per cent of all house purchases with a mortgage, which is up from 36 per cent in 2007.

The estimated figures are also the highest seen since 2002 when 531,800 took their first step onto the housing ladder. The last time transactions got close to this level was 15 years ago, with 400,900 first-time buyer transactions in 2006.

The new estimates are double the figures from immediately after the financial crisis, which was around 200,000 between 2008 and 2012.

Despite the average price of a typical first-time buyer home increasing by nine per cent from £204,230 to £222,997 in the year to October 2021, the building society says that first-time buyers have not been deterred.

The ability of first-time buyers to increase the size of their deposits has been reinforced by the stamp duty holiday and the sudden drop in expenditure during lockdowns.

The proportion of households’ disposable income saved nationally rose from seven per cent in 2019 to 27 per cent in the second quarter of last year, which was the highest since records began in 1963 by some margin.

Current estimates suggest that in aggregate households have built up excess savings of £170 billion since March 2020.

According to the English Housing Survey (EHS), first-time buyers are typically in high-income groups and have financially benefited from the measures introduced to curb COVID-19 infections.

The EHS also revealed that over 60 per cent of first-time buyers are in the top 40 per cent of the income distribution, which, according to the Bank of England, has shown the greatest improvement in household finances.

Nitesh Patel, a strategic economist at the Yorkshire Building Society, said that the performance of the first-time buyer market in 2021 has been ‘extraordinary’, especially given the backdrop of uncertainties caused by the lockdown and the pandemic.

“There are some strong drivers of demand that explain the increased volumes. Low borrowing costs is an important factor and the increased availability of more low deposit mortgages has also been an enabler mostly for first-time buyers,” he said.

He explained that other factors include falling unemployment and a strong jobs market and that in the near-term, demand for properties will continue to outstrip supply, but with prices elevated in comparison to income, activity may slow down.

“Therefore, it’s unlikely that we will continue to see first-time buyer numbers at this level in 2022 and beyond.”

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