In the ever-evolving landscape of the UK housing market, first-time buyers (FTBs) continue to play a crucial role despite facing unprecedented challenges. This blog post delves into the findings of the 2023/24 edition of the First Time Buyer Economy, a collaborative research effort with the Centre for Economics and Business Research (Cebr). The report sheds light on the hurdles faced by FTBs, the impact of market conditions, and the indispensable role of mortgage brokers.

Introduction:

The research, derived from a survey of 1,000 FTBs and supplemented with data from various sources, presents a comprehensive overview of the FTB landscape in the current economic climate. It aims to explore the challenges faced by FTBs, the impact of rising interest rates, and the anticipated trajectory of the first-time buyer market.

Where We Are: The FTB Landscape:

The report starts by addressing the challenges faced by FTBs in recent years, exacerbated by the Covid-19 pandemic, soaring inflation, and rising interest rates. The housing market experienced a slowdown, prompting many FTBs to postpone their buying decisions. Despite these challenges, the research reveals that over a quarter (29%) of all UK residential property transactions in the last five years were carried out by FTBs.

The average age of an FTB has only increased by one year since 2022, standing at 34 in 2023. Regional disparities in house prices are evident, ranging from £193,800 in Yorkshire to £374,100 in Edinburgh. The report highlights the critical role of mortgage brokers, with 96% of buyers using their services finding them invaluable.

Where We’re Going: A Steady Recovery:

Looking ahead, the report anticipates a recovery in FTB transactions as market conditions stabilise. The number of FTB loans is projected to fall by 24% in 2023, but a steady recovery is expected in 2024, with 330,000 transactions predicted. Average loan sizes are set to increase by 3% to £202,500 in 2025, contributing to a total mortgage lending value of £65.3 billion in 2024.

The recovery is attributed to the gradual fall in mortgage rates, lower inflation, and improved market access following changes to mortgage stress test rules. Brokers are urged to remain proactive in supporting FTBs amid rising living costs and interest rates.

The Profile of a First Time Buyer:

Examining the demographics of FTBs, the report notes a shift in age groups, with fewer buyers aged 18-24 (10%) and an increase in those aged 35-44 (43%). Brokers are advised to engage effectively with these age groups, leveraging social media platforms tailored to their preferences.

Funding the Deposit:

Despite affordability concerns, the report reveals that raising a deposit remains a significant challenge for FTBs. The majority (58%) fund their deposit independently, while others share costs with partners or rely on inherited money. Brokers have an opportunity to bridge the knowledge gap, ensuring FTBs understand the upfront costs associated with homebuying.

The Unforeseen Costs:

Prospective buyers need to consider the often overlooked aspect of unforeseen costs, including legal fees, stamp duty, and moving expenses. FTBs are spending an average of £8,300 on these additional costs, contributing an estimated £3.1 billion to the UK housing market by 2025. Brokers are urged to educate FTBs on these costs and provide personalised advice.

The Value of Broker Advice:

Closing the loop, the report underscores the increasing importance of broker advice, with 96% of FTBs finding their brokers crucial in the homebuying process. Despite this, a significant portion (44%) would turn to family and friends for advice. Brokers are encouraged to bridge this knowledge gap and tailor their support to different age groups.

Conclusion:

In conclusion, the First Time Buyer Economy report for 2023/24 provides valuable insights into the challenges, trends, and opportunities in the FTB market. As FTBs navigate a complex economic landscape, brokers emerge as essential guides, offering not just financial assistance but crucial education and support. The blog post serves as a call to action for brokers to adapt to evolving market conditions, engage effectively with diverse age groups, and continue providing indispensable support to FTBs in their homeownership journey.

This article contains insight drawn from the 2023/24 edition of the First Time Buyer Economy report by Coventry Building Society.