Lowest number of first-time buyers in a decade, says major building society

The number of first-time buyers who snapped a home with a mortgage last year is forecast to be at the lowest level in a decade, a major building society says.

First home buyer numbers are down by a fifth in 2023 compared to the year previous, according to Yorkshire Building Society. 

It says there were 370,287 buyers who got onto the first rung of the property ladder in 2022 – and in 2023, it believes this has dropped by 21 per cent to around 290,000.

This would be the lowest level since 2013, when roughly 260,000 bought their first home. 

It marks a huge drop on 2021 when the number of first-time buyers was at a 20-year high, with more than 400,000, amid the pandemic-fuelled ‘race for space’ as more people were able to work from home.

In December 2021, the first of a string of Bank of England base rate increases started, pushing up borrowing costs, including mortgages.

In recent months, rates have been kept on hold, and the recent easing of inflation has fuelled speculation about when rates might start to fall.

The drop in first-time buyers last year was less severe than the decrease in the overall number of buyers, Yorkshire said. 

This means the estimated proportion of first-time buyers represented a bigger share of home buyers overall last year, at 54 per cent, nudging up from 53 per cent in 2022.

It was also significantly higher than the 41 per cent of buyers who were taking their first step on the property ladder a decade ago.

The Yorkshire said that, while activity across all borrower types has fallen due to higher interest rates, cost-of-living pressures and high house prices, first-time buyers remain determined to overcome these challenges to invest in their own bricks and mortar.

But it added that borrowers are finding it harder to meet affordability requirements due to the combination of higher house prices, rising day-to-day costs and interest rates.

Ben Merritt, Yorkshire Building Society’s director of mortgages, said: ‘First-time buyers are the lifeblood of the market and are still clearly keen to buy.’

He pointed added that: ‘The wider market relies on them, not least to support purchases higher up the chain.’

Yorkshire Building Society’s group economist Max Shepherd added: ‘Current market expectations suggest several rate cuts in 2024, which would ease mortgage rates in the first half of the year.’

The calculations are based on lending data from banking and finance industry body UK Finance up to September 2023, with buyer numbers for October, November and December 2023 being estimated by Yorkshire Building Society, in line with previous first-time buyer patterns.