Optimism rising among first-time buyers – study

Majority of them are more confident about getting the keys to their dream home

Optimism rising among first-time buyers – study

First-time buyers in the UK are now more confident of getting on the property ladder than at the beginning of this year, research conducted on behalf of HSBC UK has revealed.

Nearly seven in 10, or 68%, of those hoping to buy their first home in the next 12 months said they were more confident about getting the keys to their dream home than they were at the start of 2023.

A variety of reasons for wanting to purchase a property were cited by first-time buyers, including their perception that it was cheaper than renting (21%), wanting their independence (20%), financial security (17%), and providing for their family (14%). One in nine, or 11%, said it was because they regarded their first home as an investment.

“It’s encouraging to see more optimism among first-time buyers,” commented Andrew Matson, head of mortgages at HSBC UK. “The first half of this year has been challenging, but the shift in attitudes is reassuring and highlights the resilience of the housing market.

“While we don’t have a crystal ball to see what the future holds, it is pleasing to see the positive sentiment running throughout our research.”

First-time buyer economy’s value to hit £74.1 billion by 2025

Another study has estimated that the value of the first-time buyer economy will reach a total of £74.1 billion by 2025, with mortgage lending to this segment of the market alone predicted to reach £71 billion in two years’ time.

According to the latest research by Coventry for intermediaries in partnership with the Centre for Economics and Business Research, first-time buyers could spend an average annual total of £3.1 billion on extra costs relating to home purchase by 2025.

This year’s estimated mortgage lending to first-time buyers is £56.5 billion. That figure is forecast to increase by 16% to £65.3 billion next year and by 26% in 2025.

Results of the survey of 1,000 first-time buyers across the UK also showed that they were spending an average of £3,400 on additional upfront costs including moving and legal fees, as well as surveyor, valuation, and mortgage fees – £300 higher than the costs reported in last year’s survey and above inflation.

In addition, it is estimated that they will spend £4,900 individually on renovating and redecorating their home within 12 months of moving in, making the combined total spend on top of their mortgage around £8,300.

“There’s no doubt that this year has been challenging for borrowers, with high mortgage rates, inflation, and the ongoing cost-of-living crisis impacting people’s financial decisions,” said Jonathan Stinton, head of intermediary relationships at Coventry for intermediaries. “Despite this, new buyers still need and are keen to get onto the property ladder.

“According to our report, first-time buyers have accounted for almost a third of all UK property transactions over the last five years and are a huge contributor to the UK economy. As the mortgage market and economy stabilises in the next couple of years, we will see even more first-time buyers ready to enter the market.”

First-time buyer activity recovers in September

The value of the first-time buyer segment dipped to £4.8 billion in August – nearly half the value of the market just two months prior when it stood at £8.8 billion in June, according to the first-time buyer snapshot published by digital bank first direct.

However, by the end of September, first direct reported that said value had increased back up to £6 billion.

The volume of first-time buyer applications was also down by 40% between June and August, but increased from 24,642 back to 30,733 in September – a 25% increase month-on-month.

“The August figures showed that the recent volatility in swap rates had a big impact on the mortgage market overall,” stated Liam O’Hara, head of mortgages at first direct. “However, this was followed by much stronger figures in September, which demonstrates the resilience of the market.

“Despite the recent volatility, we know that appetite for home ownership remains high and that the market often bounces back quickly when it stabilises. Now more than a year on from the mini budget in September 2022, it will be interesting to see what Q4 has in store.”

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