First-time buyers surge in mortgage market

First-time buyers have significantly increased their presence, capturing a larger slice of mortgage applications in 2024, research reveals.

According to Alexander Hall, a mortgage adviser, new entrants to the property market are capitalising on a more supportive economic landscape.

Its data reveals that first-time buyer mortgage applications accounted for 28.7% of its total activity last year.

That’s a big rise from 23.3% in 2023 and 22.3% in 2022.

Buyers are becoming prominent

The firm’s director of partnerships, Stephanie Daley, said: “First-time buyers are becoming more prominent players in the mortgage market, as conditions are improving.

“Rising incomes, more modest rates of house price growth, and lower mortgage rates are all making the market more favourable.”

She added: “It’s also fair to say that first-time buyers, in particular, have benefited from a greater range of lender improvements and product innovation in recent years, which has provided them with a greater range of ways to climb the ladder.”

Offsetting other buyer declines

Despite stable overall mortgage application numbers, the 23.1% increase in first-time buyer applications suggests they are offsetting declines in activity from home movers and property investors.

Several factors are driving this trend such as the Bank of England’s base rate falling from 5.25% in July 2024 to 4.25%, easing borrowing costs.

Rising incomes have also bolstered purchasing power, with the average first-time buyer earning £31,717 in 2024, while typical house prices stood at £226,744.

Recent research highlights that affordability for first-time buyers is at its strongest in a decade.

Stamp duty relief

The study also shows that a temporary stamp duty relief, which exempted the first £425,000 of a property purchase from tax until 31 March for properties under £625,000, spurred many to finalise deals in late 2024.

However, the threshold has since dropped to £300,000, potentially impacting future activity.

The data also indicates increased competition among lenders, with first-time buyers using 31 lenders in 2024 compared to 35 in 2023, despite higher application volumes.

It says this suggests a tighter but more competitive lending environment, which is pushing rates down.

Also, 61% of first-time buyers chose two-year fixed-rate mortgages in 2024, up from 37.5% in 2022, reflecting confidence in further base rate cuts.