First time buyers are outpacing the rest of the market with the number of sales 4% higher than March 2019.
Soaring rents have been the catalyst for a surge in first time buyers, who are increasingly opting for 40-year “marathon mortgages”.
Stimulating demand
The housing market has seen a shift in the number of first-time buyers purchasing a property, despite the on-going cost of living crisis.
The cause? Increasing rents. Tenants are struggling to keep up with rising rents that are playing catch-up with economic inflation.
Instead, renters are turning to homeownership – taking out longer mortgages that flaunt attractive lower monthly payments.
Figures show that the number of people taking out mortgages exceeding 35 years has doubled to 17% in the last year.
Additionally, first time buyers taking out mortgages between 30-35 years has also jumped from 34% to 38% within the same time frame.
Pros
The current surge of interest from first-time buyers is bolstering the housing market. Due to demand, the long-predicted drop in housing prices has not materialised.
This is a fantastic opportunity for renters to get on to the property ladder and start the journey towards homeownership, paying less in mortgage payments per month than rent.
Estate agents now have around 25 homes for sale, compared to just 14 on average in 2022, outlined in Q1’s House Price Index round-up.
For the property industry as a whole, first-time buyers are injecting a new lease of life into the industry by stimulating demand and financially propping up the sector.
Cons
Longer term mortgages are proving more desirable despite the fact that they are more expensive now.
Whilst 35-40 year mortgages my seem like the better option currently, interest rates in the long term are unpredictable and could rise significantly.
The housing market has adjusted to its economic surroundings, which is reflected in the number of mortgages, with a maximum of 40 years, available today: 67%.
However, the affect of longer term mortgages on the housing market may only be a short term solution to what experts are dubbing a “broken housing market”.
Housing market at a glance
House prices across the UK are currently nine times the average person’s salary, a statistic not seen since the Victorian era.
In Western Europe, England has the lowest number of homes per 1,000 people yet the market is seeing its highest level of demand since October 2022 with property prices 1% lower than they were then.
The housing market is not without its struggles though. Housing targets have been diluted and the country has been suffering from a labour shortage, ultimately restricting housing output over the last year.
Yet, experts are certain we will see more housing output, frequent sales, and increased demand as the year progresses.
