First-time buyer market value soars

It's still way below the average values of the last two years though

First-time buyer market value soars

The value of the first time-buyer market increased significantly in February 2023, up 40% from £4 billion in January to £5.6 billion, analysis of CACI data by first direct has revealed.

The overall mortgage market also grew in February, with a sharp increase in the value of mortgage applications seen across the board. It hit £17.7 billion, up 39% month-on-month from £12.7 billion of the previous month.

The volume of first-time buyer applications rose by 33% month-on-month, lower than the monthly growth rate of the first time-buyer market value, which meant that the average loan value also went up substantially in February.

This was reflected across the overall market, although the contrast between value and volume growth was not as pronounced in the total market data compared to the first-time buyer pool. Across the total market, loan application volumes rose from 60,470 in January to 82,315, an increase of 36%, compared to value growth of 39%.

“February has seen a steep increase in mortgage applications across the housing market, after a subdued four-month period,” commented Carl Watchorn, head of mortgages at first direct. “It’s not unusual for January to be one of the quieter months of the year, with many house movers and buyers delaying plans until after the festive period. We saw a similar uplift of activity between January and February last year, which saw the value of mortgage applications shoot up 45% month-on-month.”

Watchorn (pictured) added: “While January is often a month of small volume, the last two years show March as a record month for first-time buyer activity, with the value of applications tipping £10 billion in both 2022 and 2021. Although we are perhaps less likely to see next month match those numbers, considering those were partially fuelled by the context of the post-pandemic housing market, we expect it will nonetheless continue its upwards trajectory.”

Average first-time buyer loan value passes £200,000 mark

first direct also reported that the average first-time buyer loan reached £202,835 in February 2023, up from £194,582 at the end of January. This marked the first time the average application value has tipped over £200,000 since September 2022, where it stood at £210,340.

The bank noted that between September 2021 and September 2022, the average FTB loan value remained consistently above £200,000, showing the impact of a booming post-pandemic housing market.

The average home mover application value remained considerably higher than the average first-time buyer loan at £246,527. However, the-first time buyer loan average value overtook the average remortgage for the first time in more than two years. The latter stood at £201,133 whereas it was usually considerably higher than first-time buyer average loans, first direct said.

“Both the rising cost-of-living and the broader economic climate will be contributing factors to the average first-time buyer loan coming down significantly between October 2022 and January 2023,” Watchorn remarked. “This will be due to people opting to borrow against cheaper properties, or waiting to save up a larger deposit in order to reduce the amount they borrow.

“Signs that average lending is back on the up is possibly an indication that the market is stabilising. It is also interesting to see that first-time buyer average loan value has overtaken remortgages for the first time in a long time. This could suggest that some customers are using built-up savings to reduce their mortgage balance as they attempt to reduce the impact that the higher cost of borrowing will have on their monthly payments.”

First-time buyer market still below the average values of the last two years

While the first-time buyer market is back on an upwards trajectory, numbers have remained subdued compared to some of the peaks of the previous two years. It was still lower than the 2022 monthly average value of £7.3 billion and the average 2021 value of £8.1 billion. At £5.6 billion, the market was just over half of the values of February and March last year.

“Over the last two years, Q2 has been a month of strong performance for the first-time buyer market,” Watchorn pointed out. “If this trend persists this year, it will be a good indication of the direction of travel for the second half of the year.”

Do you think the first-time buyer market will further recover throughout the rest of the year? Share your thoughts with us by leaving a comment in the discussion box at the bottom of the page.