The number of homes bought by first-time buyers in 2024 is estimated to have risen by nearly 13.8% annually, close to historical highs, analysis from a lender showed.
Research from Yorkshire Building Society showed that, based on figures from UK Finance that go up until the end of October, it has predicted that there were 330,000 first-time buyer mortgage transactions last year, 13.8% higher than the total of 290,000 in 2023.
The number of first-time buyers in the market in 2023 was also the lowest in 10 years, due to the cost-of-living crisis, higher interest rates and rising house prices. Yorkshire Building Society said these factors put potential homeowners off from getting onto the property ladder.
Max Shepherd, group economist at Yorkshire Building Society, said sales activity would remain strong in the first few months of the year as buyers rushed to avoid the change in stamp duty thresholds. After this, existing homeowners may be deterred from selling, which could once again see house prices rise further.
Shepherd said: “While the trend is no doubt positive, the stamp duty change announced in October’s Budget and ongoing geopolitical headwinds represent further risks to keep an eye on. The reduction in the threshold at which stamp duty land tax is paid, to £300,000, means that anyone buying a £500,000 home would pay an extra £10,000, and £25,000 if their property is worth over £500,000. Previously, properties up to £425,000 in value were exempt.
“Although buyers in regions like the North are likely to be unaffected by the change, higher house prices in the South could see buyers there caught in this trap.”
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The highest number of first-time buyer transactions in the last 20 years occurred in 2021, when this reached 400,000. This was fuelled by low borrowing costs and changes in working habits after the pandemic.
First-time buyers back in the game
Overall, there was a 10% rise in house purchase activity last year, and the mutual expects 2024 to record 1.1 million transactions, up from one million in 2023.
Similarly to 2023, first-time buyers drove most of the buying activity.
Shepherd added: “The base rate cuts during 2024 are one of the factors that have contributed to increased first-time buyer confidence, though caution is needed when it comes to any hopes they might see materially lower mortgage rates in 2025. The market is expecting three base rate cuts this year, which have been priced in by the market already, so I don’t think we’re likely to see average rates fall much below 4%, and therefore anyone thinking of buying should probably base their planning around that.
“Economic factors like real earnings growth, the introduction of the new minimum wage and the fact unemployment is still low are contributing to the increase in confidence, which is good to see, but there are a lot of variables at play.”
