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Stamp duty and easier mortgages help first time buyers select larger homes

First time buyers will constitute the largest single group of purchasers in 2019, despite the apparent difficulties of deposits and securing mortgages.

That’s the verdict of an in-depth research project from Zoopla.

The report concludes that first time buyers are taking a longer term view, typically seeking three bedroom properties or larger that they can stay longer and grow into – certainly staying in their first home longer than their parents did. 


The report says there is no evidence FTBs are rushing into securing smaller, lower value homes to force their way onto the market.

Unlike all other buyer groups such as existing mortgaged owners, cash buyers and buy to let investment purchasers, the number of purchases by FTBs has been on a strong upward trajectory - up 85 per cent since 2010, according to mortgage group UK Finance.

“First time buyers have been the driving force behind the housing sales market in recent years. Lower mortgage rates, and improving mortgage availability have supported the growth in FTB numbers across the country” explains Richard Donnell, research and insight director at Zoopla.

“Despite increased barriers from high house prices in southern England and mortgage regulations, the appetite to buy their first home remains strong. Whilst the outlook is more challenging in London, growth in FTB volumes is expected to be driven in regional markets where affordability remains attractive, supported by greater availability of higher loan to value mortgages” he continues.

A recent hurdle for FTBs explored in the Zoopla research is the impact of new mortgage regulations designed to stop households taking on high levels of debt at a time when mortgage rates remain close to historic lows. 

An FTB looking to buy a home will typically find that the monthly cost of mortgage repayments at the so-called ‘product rate’ will be less than the average rent for the same property. 

However, in order to get the mortgage the buyer has to prove to the bank they can pass an affordability test, paying a higher ‘stressed’ mortgage rate to ensure they can manage an increase in mortgage rates. This stressed rate is often closer to seven per cent while the typical product rate is around two per cent today.

“Mortgage regulations introduced after the global financial crisis to ensure households do not become over-indebted mean affordability testing creates an additional hurdle. The impacts of these changes have been felt most in the highest value housing markets and London is the region where FTB numbers have fallen back over the last four years” says Donnell. 

“Faced with affordability constraints, first-time buyers have two options: shift focus to buy smaller, less-expensive homes or take advantage of the increasing availability of high loan-to-value mortgages.”


Overall, says Donnell, the greatest potential for further growth in first time buyer numbers is in the North West of England and in Scotland, where growth has been most robust recently. 

“Changes to the Help to Buy scheme in England from 2021 could have an impact on the 14 per cent of FTBs using this scheme to buy their first home. However, the impact could be off-set by higher loan to value lending and newer forms of tenure such as shared ownership. First-time buyers will be the largest buyer group this year and there is no evidence that the long run appetite for home ownership will diminish any time soon” Donnell concludes. 


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