First-time buyers beating the Spring bounce in 2023

Spring has sprung which traditionally provides the housing market with something of a pep to its step, with properties tending to look their best with some dappled sunshine on them.

However, it would appear that when it comes to potential new purchasers, first-time buyers haven’t necessarily been waiting for Spring in order to make their first moves.

Recent CACI data, analysed by First Direct, showed the value of mortgage applications made by first-timers rose sharply in February, up to £5.6 billion, the highest figure since September when I suspect the market had not quite got to grips with all the fallout from the ‘Mini Budget’.

Of course, applications don’t necessarily translate into completions but it’s still a sizeable uplift, especially for a month that might ordinarily be considered one of the quieter ones during a traditional housing market calendar year.

It also points to a positive direction for March and April’s figures, especially given that March in 2021 and 2022 were the big months for first-timer activity, both exceeding £10bn in the last two years.

So, what might the rest of the year hold for the first-time buyer market? Well, certainly, if average house price values reported by the major indices are anything to go by, then the deposit levels required by first-timers might be inching down, and that in itself could act as a catalyst for activity.

It’s widely expected that prices will continue to drop through the rest of 2023, with 2024 signalling the point when they might head back up again. Of course, we’re not in ‘house price crash’ territory by any means, and the levels we anticipate being seen in 2023 actually only take us back to where we were a couple of years ago.

However, given that prospective buyers would have been living through an environment where they have seen increased prices ever since the end of the first Covid lockdown, you can imagine there will be some ‘relief’ to see prices begin to come down, as this may well bring them within reach for more buyers.

Of course, everything is relative, and we know there is really no such thing as an average UK house price, and the localised nature of house prices may actually mean some purchasers are not seeing any dip in asking prices, quite the opposite.

Yet, as Zoopla research recently pointed out, while demand for homes is down on this time last year, it is the highest it has been since October. And we are seeing a greater number of homes available to purchase – 65% higher than at the same time last year, with the average agent having 25 homes available to sell, compared to 14 in 2022.

It's perhaps not time to get the bunting out yet, but a greater degree of equilibrium between demand and supply, tends to mean a more realistic assessment of value for both buyers and sellers, which Zoopla believes has resulted in new sales agreed on track to be over half a million in the first half of 2023.

In the last couple of years, we’ve been over a million for the full year and if that could be achieved again this year, then I think there would be a fairly satisfied property market community, particularly given many forecasts and estimates were for it to be well below a million.

For first-time buyers it means they are perhaps not languishing at the end of the queue when it comes to being able to buy a first property, and the fact those applications are on the rise, perhaps tells us the greater degree of success they are having.

Certainly, the continued availability of high LTV mortgage products will have had a great deal to do with this. Having taken a huge dip post-‘Mini Budget’ we’ve seen the number of 95% LTV products rising and, importantly, the vast majority are fixed-rate deals which tend to be favoured by first-timers seeking that mortgage payment certainty in the early years of their first mortgage.

One hesitates to say this, but there appears to be more of a balance in the housing market at the moment, and first-timers – at least those who can get over the major deposit-saving obstacle – are as likely as any to be the beneficiaries of this.

It’s therefore important lenders continue to work hard to offer the type of products first-time buyers want and need, and we continue to recognise that without the lifeblood of this market – new entrants – we will have a market which is forever out of kilter.