First-time buyers saving £20,300 below local market average despite £200pcm hike in mortgage repayments

First-time buyers (FTBs) purchasing a house at an average of £244,100 are saving £20,300 (8%) below the local market average – rising to savings of £137,800 (26%) in London, property website Zoopla reveals.

Analysing exclusive, up-to date data on thousands of FTBs, Zoopla also found that this is despite first-time buyers purchasing a property at an increase of £2,800 (1.2%) compared to a year ago.

In spite of increased mortgage rates, being a first-time buyer can bring savings – particularly in certain regions around the UK. This is most evident in areas that saw the largest value boosts during the pandemic, such as the South West. For example, the typical discount being sought by a first-time buyer in Truro in Cornwall and Dorchester in Dorset is 39% below the local market average: the UK’s largest discount for first-time buyers. 

£200PCM MORE ON MORTGAGE COSTS

Once FTBs have purchased their first home, hikes in mortgage rates throughout 2023 meant that the average first-time buyer is paying mortgage bills that are 27% – or £213 pcm – higher than if they’d purchased their home in Q4 2022. The average £990 pcm figure is still lower than the UK average rent of £1,221 pcm proving that deposits remain a barrier to entry for many would-be buyers. 

Source: Zoopla Research calculations based on the average price of a FTB property, average LTV and FTB mortgage rate from UKFinance.  

THREE BED HOMES

Traditionally, many FTBs would look for a smaller home in order to get on to the property ladder with a view to upsizing in future. This has been the case in London, where 66% of first-time buyers are enquiring about flats, up from 63% a year ago. Similarly, Scottish FTBs are also now more interested in flats compared to 2022. 

However, the average age of a first-time buyer in the UK is 33, which means many may be buying with family needs in mind. In fact, nearly twice as many first-time buyers now have dependent children, compared to the pre-2007 financial crisis period. This, as well as more modest equity and wage growth than a few decades ago, is encouraging first-time buyers to look for more long-term homes, rather than traditional starter homes or flats.

As a result, terraced homes are one of the most affordable and sought-after options for those looking to buy a family-sized home. This is particularly true for southern England where over a third (37%) of enquiries are for terraced homes, compared to one in four (43%) in the North and 46% in Wales. In the Midlands, classic three-bed semi-detached homes are the most popular choice for first-time buyers where prices have remained flat to 2022.

LOCATION, LOCATION, LOCATION

Only 27% of first-time buyers are looking for their first home 10 miles or more from where they’re currently living, down from 29% a year ago as the number of homes on the market increased. Over half (55%) of first-time buyers enquire about homes within a 5-mile radius from where they are based, which is a bigger proportion than other buyer group (48%). FTBs are more likely to look for a home more than 10 miles away in southern England where affordability is a bigger barrier.

Izabella Lubowiecka, ZooplaIzabella Lubowiecka, Senior Property Researcher at Zoopla, says: “We expect more first-time buyers to come to market in 2024, particularly in the second half of the year thanks to a combination of reduced mortgage rates, earnings growth and improved affordability.

“But the reality is that many would-be buyers might be able to get on the ladder now by considering different property types or alternative locations that offer better value for money.

“First-time buyers are in a stronger position in the current buyer’s market so we encourage them to be resourceful and assess all the options available to them.”