FTB mortgage market set to reach record highs in 2024

“The picture is a fast-changing one, and despite continued inflationary pressures keeping interest rates higher than hoped; coupled with ongoing volatility caused by economic and political uncertainty, consumer confidence seems to be returning”
– Jeremy Duncombe – Yorkshire Building Society

As far as forecasts go, the housing market has started the year defying all expectations, particularly where first-time buyers are concerned.

In fact, analysis from Yorkshire Building Society and business consultancy CACI suggests they now make up a higher proportion of the home purchase market than at any time since the business consultancy began measuring such market statistics in 2016.

The mutual has seen overall mortgage applications rise by almost a quarter in 2024, despite forecasts from UK Finance that gross lending would be lower in 2024 than it was in 2023. In its November 2023 figures, the trade body suggested gross lending would fall from £226bn to £215bn this year, but actual activity has challenged that forecast so far.

In fact, the Society’s analysis of CACI’s data suggests the value of mortgage applications year-to-date is 15 per cent higher than the equivalent period in 2023, while first-time buyer applications have grown by 33 per cent in the same period – making them the fastest-growing group, significantly above home movers and people remortgaging.

Meanwhile, the Society’s analysis of CACI data also highlights the fact that activity among first-time buyers has risen by almost 25 per cent over the past eight years, with them now making up almost 40 per cent of mortgage applications in the market on average, compared to around 30 per cent for the equivalent period in 2016.

The analysis also shows that the proportion of mortgage applications by first-time buyers overtook home movers – who have previously dominated activity – for the first time in January.

Jeremy Duncombe, director of mortgage distribution at Yorkshire Building Society, said: “Things have changed substantially since UK Finance issued its forecasts last November.

“The picture is a fast-changing one, and despite continued inflationary pressures keeping interest rates higher than hoped; coupled with ongoing volatility caused by economic and political uncertainty, consumer confidence seems to be returning.

“While there is continued uncertainty and it’s therefore important to be cautious, the year has got off to a far better start than predicted, with housing market activity on the rise. House prices are predicted to settle and maybe even increase moderately throughout the rest of the year, with more stable mortgage rates resulting in more buyers deciding to dip their toes back in.”

He added: “The increase in first-time purchaser numbers could be attributed to a number of factors. We know from our own research that many are making life-changing decisions to prioritise homeownership over other milestones like starting a family.

“High rental costs are making the prospect of owning a property more appealing and many may feel they’re just not prepared to put off buying any more in the hope rates might reduce.”

Average rates in the mortgage market have fallen by around 1.25% since their July 2023 peak of around 6.5% but increased again recently in response to economic developments in the UK and elsewhere.

Meanwhile, the latest Office for National Statistics data shows that average rents rose by nine per cent in the 12 months to February 2024, the highest annual increase since they began compiling this data in 2015. The average monthly rental figure in England stands at £1,276 yet the average monthly mortgage payment for a first-time buyer sits around £1,139.

Jeremy concluded: “When you consider figures like these, it’s not hard to understand why first-time buyers are increasingly aiming at home ownership despite the higher-interest-rate environment. Our own experience with our recent £5k Deposit Mortgage shows the strength of demand from first-time buyers to get on the housing ladder.

“While purchasing a home is clearly an emotive choice, it’s also a big financial commitment. Results from our Home Truths report, published last autumn, showed that, for over half of respondents, not wasting money on rent was the main driver for buying their own place.”