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Cost of living crunch is hitting lower end of the prime market - Savills

A third of first-time buyers have had to reduce their budgets as a result of recent interest rate hikes and the rising cost of living.

Savills, which conducted the research, warned that this may impact sales at all levels due to fewer first-time buyers starting chains.

Its research found that while the prime market is being hit by a lack of supply, particularly around the £1m to £2m and more mark, three quarters of buyers in this cohort haven’t had their budget impacted by the cost of living crisis and 80% have been undeterred by rising interest rates.


First-time buyers, perhaps more obviously, were found to be having a tougher time from rising interest rates and higher bills, both of which impact the ability to pass mortgage affordability tests and push up pricing.

The Savills research - based on a survey of 1,300 buyers and sellers - found that a third of those who are trying to take their first step onto the housing ladder said their budgets had decreased as a result of interest rate rises. 

Additionally, 47% of those looking at properties priced below £500,000 said their budgets had decreased because of the rising cost of living.

Frances Clacy, research analyst at Savills, said: “With the market as competitive as it is, motivated buyers can ill afford to reduce budgets, despite rises to mortgage rates and household bills.

"But most buyers at the top end of the market will have built up equity in their existing home and will be able to fix into more favourable rates and are therefore less impacted by the squeeze. Our analysis also suggests that as many as 30% will effectively be cash buyers.

"Rising interest rates limit affordability at the point of purchase, which will especially impact first-time buyers who have less equity to back them and will no longer have the support of the government’s Help to Buy scheme from 1 April next year if looking to buy a new build home. 

“Falling numbers of first-time buyers starting chains could impact transactions as a whole further down the line this year.”

Higher energy prices have even persuaded many to spend more on a home, according to the research.

Almost three in five respondents said they would be happy to pay more for a property if at least 75% of the property’s energy was powered by renewable sources. 

More than a quarter said they would be happy to pay more than 5% extra for the privilege. 

It comes as 68% of respondents said energy performance ratings were important to their decision making, with a third saying that they placed more importance on this than they did a year ago. 

Clacy added: “As households face mounting energy bills, buyers are ready to pay more for cleaner homes upfront, to offset rising bills in the long term. 

“The fitting of extra insulation and double glazing can cost thousands upon moving in and paying more upfront could prove more cost-efficient in the longer term.” 


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