First-time buyer market achieves strongest quarter in two years

Lenders reducing rates to start the year drove surge in first-time buyer figures

First-time buyer market achieves strongest quarter in two years

The first-time buyer market in the UK experienced its strongest quarter since 2022, with the value of applications reaching £24.2 billion in the first three months of this year – representing a 37% increase compared to the same period last year.

According to data from CACI, analysed by first direct, February marked a significant milestone in the upward trend, with first-time buyer loan applications hitting an all-time high of £11 billion – a figure not seen since at least 2016 and nearly double that of February 2023’s £5.6 billion.

Comparatively, the value of applications during the first quarter of 2021 was slightly higher at £24.7 billion, indicating a return to pre-pandemic levels of activity. This quarter’s performance is the most robust since the September 2022 mini budget.

First-time buyers accounted for 35% of the total new business mortgage market value in Q1, while home movers represented 34%, and remortgages made up 31%.

Application volumes for February also surged, with 49,982 first-time buyers applying for mortgages, the highest monthly number since March 2022.

“It’s been a positive start to the year across the mortgage market, with the volume of first-time buyer applications ahead of home movers and remortgages, shooting up to numbers not seen in nearly two years,” said Liam O’Hara, head of mortgages at first direct.

“If we cast our mind back to the New Year, we saw most mortgage providers reduce mortgage rates considerably in response to reduced swap rates. The positive impact of this was seen across the market, with first-time buyer mortgage applications flooding in across February.

“The appetite for home ownership remains consistent, with aspiring homeowners acting fast in order to secure competitive rates. This shows the resilience of first-time buyers even in a higher rate environment, and the desire to get on the ladder driving the category to dominate the market when it comes to volume.”

The average loan value for first-time buyers in Q1 was £215,000, peaking in February at £219,340, the highest average in recent years – an 8% year-on-year increase from February 2023’s average loan value of £202,835.

“There are a number of factors that influence loan value – but overall, an increase in average loan value is a positive sign that mortgage affordability is increasing, and that people are in a position to borrow more,” O’Hara said.

“A factor could be that first-time buyers are applying for mortgages with smaller deposits opposed to necessarily opting for more expensive houses, although the data shows only a marginal increase in people opting for higher LTV mortgages of 90% and above, compared to the same period in 2023.”

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