First-time buyers fuel 7.1% surge in house prices

First-time buyers, capitalising on relaxed lending rules and more affordable mortgages, have driven a 7.1% annual increase in the cost of first homes, according to Land Registry figures.

In March, these buyers paid an average of £231,000 for their properties, a £15,350 jump compared to the previous year.

From January to March, the average amount spent by first-time buyers climbed by £4,772, marking a 2.1% rise in just two months.

This growth outstripped that of existing homeowners, whose property costs increased by a modest 0.8%, highlighting a 2.5-fold faster escalation for newcomers.

Lower stress tests for buyers

Peter Stimson, the director of mortgages at MPowered, said: “Since last August, the Bank of England has reduced its base rate by a full percentage point.

“While this has brought down mortgage interest rates for all customers, buyers have also seen their borrowing power surge thanks to a relaxation of lending criteria.”

He added: “When deciding how much to lend to someone, lenders must ‘stress test’ the customer’s ability to cope with an increase in interest rates during the first five years of their mortgage.”

He says these tests have been ‘significantly lowered’ in recent months, thanks to the adoption of a more flexible approach by the Financial Conduct Authority.

Mr Stimson continued: “As a result, buyers are routinely being offered loans up to 20% larger than they were a year ago.

“For first-time buyers, who typically borrow close to the maximum they can, the ability to borrow more, and pay more, for a home is pushing up prices sharply.

“Lower stress tests have replaced the stamp duty deadline as the fuel for a first-time buyer boom.”

Spending hotspot revealed

Mortgage lender MPowered’s analysis revealed northern England as the hotspot for this spending surge.

In Yorkshire and the Humber, first-time buyers shelled out £9,467 more in March than in January, while North East England saw a £9,151 increase, equating to a 6.6% spike.

Over the past year, North East first-home costs soared by 15.1%, with a remarkable 40% rise since 2020.

East Anglia also saw significant activity, with first-time buyers paying £8,148 more, a 2.9% uptick, compared to a £5,777 increase for existing homeowners.

In contrast, London experienced a decline, with first-time buyers paying £4,742 less on average, while second steppers faced a steeper £19,048 drop.

More first-time buyers

Since 2020, first-time buyer property costs have risen by 27.1%, outpacing the 25.2% increase for movers.

A stamp duty hike effective from late March spurred many to finalise purchases early, intensifying price pressures at the year’s start.

Bank of England data indicates that first-time buyers accounted for 31.4% of the £77.6bn in new mortgage lending in the first quarter of 2025, a record high and a 5.6% increase from 2024.

MPowered suggests this trend may persist beyond the stamp duty rush.

Share This Article