First Time Buyer Mortgage Sales at Highest Rate since 2006 Despite House Price Increases

The number of buyers getting their foot onto the property ladder for the first time has risen to levels not seen since 2006, a report by Yorkshire Building Society has revealed. In 2021 there were 408,379 first time mortgages approved according to the research. This is a significant increase when compared with 2020 which showed 300,307 in first time buyer sales. This is also the first time for 15 years that the total has reached more than 400,000.

The report also revealed that, of the total mortgaged home purchases, first time buyers accounted for approximately half of all sales. Low interest rates and an increasing range of mortgage products have resulted in a surge of interest among first time home buyers looking for loans for first time home buyers. With more financing options available, it’s now easier than ever for first time home buyers to enter the property market and achieve their dream of homeownership.

The average rate for a mortgage with a 5% deposit and a two year fixed term was recorded at 3.09% in December 2021 which shows a drop from the previous month (3.22%) and is at the lowest since 2011 (when records began).

Typically, a five year fixed rate with identical terms would be 3.39%, down from 3.51% in November, and also at the lowest seen for ten years.

Strategic economist at YBS, Nitesh Patel, said: ‘The performance of the first-time buyer market in 2021 has been extraordinary, particularly against the backdrop of uncertainties caused by the lockdown in the early months of the year.

‘There are some strong drivers of demand that explain the increased volumes. Low borrowing costs is an important factor, and the increased availability of more low-deposit mortgages has also been an enabler mostly for first-time buyers.

‘Unemployment has also been falling for the last year and the jobs market has been getting stronger since the phased reopening in April.’

Despite this, it is predicted that the number of first time buyers will decrease in the year ahead due to the continued rise in property prices and the difficulty of raising funds for a deposit.

The Office of National Statistics (ONS) latest figures for October 2021 show an impressive house price rise of 10.2% over the year, with the average house price reaching £268,000. The average cost of the first time buyer home rose by 9% to £222,997 in the year from October 2020.

Even though we are experiencing record lows in interest rates, the UK continues to see many people not having the financial means to buy property. Figures from June 2021 show the house price to earnings ratio at a record high of 8.8 times, up from 8.7% in August 2007.

Patel added: ‘In the near term housing demand will continue to exceed supply; however, with prices at an elevated level in comparison to local earnings, this should dampen activity.

‘Therefore, it’s unlikely that we will continue to see first-time buyer numbers at this level in 2022 and beyond.’ 

But it’s not all doom and gloom as 88% of lenders remain eager to lend to the self-employed and with lots of different mortgage products on offer, there is a renewed hope in the market remaining stable. Over 70% of lenders would be prepared to lend to buyers with irregular income and approximately half to those with credit problems.

Lending may get even easier if the predicted relaxing of lending rules by the Bank of England takes place. Despite the recent increase of the base rate from 0.01% to 0.25%, the BOE has plans to remove the rate rise stress test for buyers which entails the borrower to prove that they can meet repayments at the lenders higher standard variable rate, plus 3%.

Chief executive of mortgage broker SPF Private Clients, Mark Harris, said: ‘Even though the Bank of England finally made its move and increased interest rates in December, confidence in the housing market continued unabated.

‘As we head into a new year, mortgage rates remain competitive and lenders keen to lend.

‘Buyers will need all the help they can get as affordability becomes more stretched than ever and with the Bank considering easing stress testing rules for first-time buyers, this will help.

‘With lenders enhancing criteria, some considering higher loan-to-incomes and others helping first-time buyers onto the ladder, the market should remain brisk as we head into January and beyond.’

Craig Upton

Craig Upton supports UK businesses by increasing sales growth using various revenue streams online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to increase traffic. Craig is also the CEO of iCONQUER, a UK based SEO agency and has been working in the digital marketing arena for over a decade. A trusted SEO consultant and trainer, Craig has worked with British brands such as, DJKit, UK Property Finance, Serimax, Bridging Finance and has also supported UK doctors, solicitors, builders, jewellers, to mention a few, to gain more exposure online. Craig has gained a wealth of knowledge within the digital marketing space and is committed to creating new opportunities working with UK companies.