Cheaper Homes for First Time Buyers

Yellow for sale sign outside a semi-detached property
Author: Samuel Beckingham
Updated: Oct 11, 2023
3 minutes read

According to data from Halifax, the number of first time property buyers between January and August this year fell by 22% compared to the same time frame last year. In the climate of high prices and stubborn inflation, more people are being put off from entering the property market. Mortgage rises alone have been enough to deter first time buyers.

However, despite more expensive mortgages, Halifax noted that buying prices have become even more affordable for first time buyers. A fall was seen in the house price to income ratio for first time buyers, which dropped from 5.8 in June 2022 to 5.1 in August 2023. This puts property prices at their cheapest since June 2020.

Some analyses point towards falling house prices, while others attribute this to rising wages. The Office for National Statistics only attributes a 0.5% increase in total pay in real terms, and a 0.1% increase in regular pay, so the more affordable prices could likely be a combination of the two factors. Halifax saw a 4.6% deduction in house prices in the year to August.

The data also suggests that first time buyers pay an average deposit of £54,116, which is typically put towards a home costing £288,030. In terms of age, a typical first time buyer is 32 in the whole of the UK, but this is now at least 30 in every region across the country.

September’s Halifax data saw the price to income ratio for all buyers fall from 7.3 to 6.7. This is higher than for first time buyers because they tend to look at more expensive properties and aren’t as reliant on their savings. This already puts first time buyers on the back foot as they don’t have capital to rely on.

Halifax mortgages tend to feed the data the bank relies on, but these suggest that buyer numbers are falling. Despite this, there were more first time buyers between January and August by 1% than regular buyers, compared to the same period last year. This means that first time buyers accounted for 53% of all mortgages approved.

In 2022, first time buyers fell by 11%, but this was because of savings during the pandemic and the stamp duty holiday. This resulted in a 59% increase in 2021. Despite the numbers falling and house prices looking more attractive, raising the funds for a deposit is still the biggest challenge facing first time buyers. Not only this, but a limited supply of housing stock and high interest rates makes for a tricky mix.

The current situation in the housing market could represent an opportunistic time for first time buyers. With less competition from other buyers and with mortgage rates steadily falling below 5%, those that can afford to can get ahead of the competition. The more people looking for homes, the higher the competition and the higher house prices will become.

Additionally, some landlords could be looking to sell their properties because of these higher mortgage rates. They may also be looking to exit the renting sector ahead of increased regulation. For some first time buyers, now could be the best time to buy before buyers start flooding back to the market.