First-time buyers paying more for homes

Zoopla says improved affordability and borrowing power among first-time buyers has led them to spend more on their first homes this year.

According to the platform, the average cost of a first-time house has increased by 2.4% in the last 12 months to £229,000.

This growth is faster than the 1.3% average increase in the housing market.

Zoopla’s latest figures also reveal that first-time buyers are not only the largest segment of home purchasers, accounting for 39% of all sales, but also represent half of all new mortgages.

Wanting higher value homes

Zoopla’s executive director, Richard Donnell, said: “First-time buyers have had a 20% boost to affordability over the last six months.

“This is enabling them to look at buying higher value homes in the more affordable parts of the country which is supporting faster house price growth across the board.”

He added: “In contrast, first-time buyers in London and southern England are looking for cheaper homes than a year ago despite the extra borrowing capacity.

“The variation in affordability explains why first-time buyers across England are looking to buy three-bed houses while in London, one- and two-bed flats remain the primary target for those buying their first home.”

Mortgage rates improve

Over the past six months, improved mortgage rates have given buyers using a mortgage around 20% more borrowing capacity which has fuelled a 30% rise in first-time buyer mortgages.

This has encouraged many to look at higher-value homes in more affordable regions, Zoopla says.

However, while affordability gains have lifted demand, there are regional differences.

In the North East, first-time buyers want homes that cost 10.2% more than last year, which is higher than the 2.4% average growth seen across the region’s wider market.

House price rises

Scotland has seen prices for first homes climb by 6.4%, while Yorkshire and Humber recorded a 6% increase.

The North West followed closely at 5.1%.

In contrast, London’s first-time buyers are targeting cheaper properties, with prices that are 2.4% lower than a year ago.

This is down to affordability pressures with higher living costs and the end of stamp duty reliefs in April continuing to affect purchasing power.

Buyers want houses not flats

While interest in flats has dropped to 29%, most first-time buyers (45%) are looking for three-bedroom homes.

They are also typically looking for properties that are 15% cheaper than the average for the local market.

As the buyers search for homes that better suit their income levels and credit constraints, this first-time buyer discount is 17% in Wales and 21% in London and the South East.