Share of UK lending to first-time buyers reaches record high

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The share of mortgage lending to UK first-time consumers hit a report excessive on the finish of final 12 months, as shopping for property turned cheaper than renting and extra landlords left the market.

Individuals becoming a member of the property ladder accounted for 29.6 per cent of all mortgage lending within the closing quarter of 2024, in keeping with knowledge printed by the Bank of England on Tuesday.

It’s up 1.9 proportion factors from the identical interval in 2023 and the best proportion since knowledge assortment started in 2007.

The share of lending for buy-to-let functions was 8.2 per cent, up marginally from the report low of seven per cent registered within the closing three months of 2023.

The remainder of the lending market is made up of individuals already on the property ladder transferring home, and people remortgaging, the mixed share of which has declined slowly over the previous 20 years.

Richard Donnell, government director at property consultancy Houseful, mentioned the figures mirrored rents rising quicker than home costs over the previous two years in addition to the drop in mortgage charges since 2023.

“Now shopping for is cheaper [than renting] throughout the UK, that is supporting first-time purchaser demand,” he mentioned. “Extra landlord gross sales additionally assist this development as they’re sometimes promoting what first-time consumers need.”

The property platform Zoopla on Monday mentioned first-time purchaser mortgage funds averaged £1,038 a month in February, 20 per cent decrease than the typical month-to-month lease of £1,248 throughout Nice Britain, as home worth progress has stalled and rents have powered forward.

Common UK personal rents jumped by 8.7 per cent within the 12 months to January 2025, in keeping with official figures printed final month, almost double the 4.6 per cent rise in UK home costs within the 12 months to December 2024.

Simon Gammon, managing companion at mortgage dealer Knight Frank Finance, mentioned lenders had been providing longer contracts or easing affordability assessments to allow extra potential consumers to get on the property ladder.

“That’s occurred as charges have eased and affordability has improved . . . [and] surging rents have given consumers an actual sense of urgency,” he mentioned.

“Double-digit will increase in rents have made dwelling possession a way more engaging choice” regardless of some volatility lately within the mortgage market, he added.

The BoE figures additionally confirmed that the proportion of mortgages in arrears plateaued on the finish of final 12 months, after rising since 2022 in response to greater rates of interest.

The share of mortgages in arrears stood at 1.3 per cent within the closing quarter of 2024, unchanged from the earlier three months.

Analysts mentioned the near-record low share of lending for buy-to-let functions pointed to the hit to the market from greater borrowing prices and taxes and extra regulation.

Gammon mentioned tighter guidelines round Power Efficiency Certificates, which rank a property’s power effectivity, in addition to “mortgage fee volatility and uncertainty over the federal government’s coverage agenda have all coincided to squeeze the buy-to-let market”.

“For a lot of [landlords], the revenue margins provided don’t adequately align with the dangers,” he added.