Lowest UK first-time buyer number

The estimated figure is expected to decrease by one-fifth, influenced by the impact of rising interest rates and elevated house prices.

In 2023, the number of first-time buyers securing a mortgage for home purchases hit its lowest point in a decade, as reported by Yorkshire Building Society, a prominent lender. These findings underscore the growing challenges of housing affordability, attributed to surging mortgage interest rates and elevated house prices. According to the lender’s calculations, approximately 290,000 first-time buyers were recorded across the UK in 2023, reflecting a 20% decrease from the 370,000 in 2022 and marking the lowest figure since 2013, when the total stood at 260,000.

The count of first-time buyers reached a peak of over 400,000 in 2021, marking a 20-year high. This surge was attributed to the widespread impact of the coronavirus pandemic, which prompted millions of individuals to reconsider their lifestyles and preferred living locations. Additionally, a stamp duty holiday further fueled sales during this period.

According to Yorkshire, which provided data to PA Media, the decline in the number of first-time buyers last year was less pronounced compared to the overall decrease in the number of buyers. As a result, the estimated proportion of first-time buyers constituted a slightly larger share of the overall homebuyers, accounting for 54% in the past year, up from 53% in 2022.

Despite the overall reduction in activity across various borrower types due to factors like higher interest rates, cost of living pressures, and elevated house prices, first-time buyers exhibited resilience in overcoming these challenges to invest in their own homes. However, the Yorkshire noted that borrowers were encountering increased difficulty in meeting lenders’ affordability requirements.

The recent data release follows closely on the heels of Nationwide, another building society, which highlighted the escalating challenges in housing affordability. Nationwide pointed out that an individual earning the average UK income and purchasing a typical first-time buyer home with a 20% deposit would face a monthly mortgage payment constituting 38% of their take-home pay. This figure is significantly above the long-term average of 30%.

Simultaneously, Nationwide noted that deposit requirements remained excessively high for many prospective buyers. A 20% deposit for a typical first-time buyer home amounted to approximately 105% of the average annual gross income, although this has seen a decrease from the peak of 116% in 2022.

Ben Merritt, the Director of Mortgages at Yorkshire, remarked, “First-time buyers are vital to the market and continue to demonstrate a strong interest in purchasing. The broader market depends on them, particularly to support transactions further up the property ladder.

For those homebuyers who navigated a tumultuous year in 2023, there is a glimmer of optimism. Many financial experts anticipate multiple interest rate reductions in the upcoming year, providing relief in the cost of mortgage borrowing.

Just before the holiday season, a five-year fixed-rate mortgage deal, priced at under 4%, entered the market for the first time since May. Brokers are optimistic about additional rate cuts in the coming weeks as banks and building societies vie for customers in anticipation of the traditional spring buying season.

The calculations by Yorkshire are founded on lending data from the banking trade body UK Finance up to September 2023, with estimates for buyer numbers in October, November, and December 2023 aligned with historical patterns of first-time buyer behavior.