"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."
- Max Shepherd, group economist at Yorkshire Building Society
First-time buyers have bounced back during 2024 as positive developments including successive falls in Bank Base Rate have boosted their affordability potential, according to new analysis from Yorkshire Building Society.
Based on the latest available figures to the end of October from UK Finance, Yorkshire Building Society is predicting there will have been 330,000 first-time buyer mortgage transactions during 2024 – up by 13.8% from the 290,000 in 2023 – which was the lowest number since 2013 (260,000). This 2023 slump was due to pressures from the cost-of-living crisis, higher interest rates and burgeoning house prices.
For context, the highest number of annual first-time buyer transactions in the last 20 years was in 2021, at 400,000 – an anomaly fuelled by unique factors such as exceptional government support and changes to working habits post-Covid, and ultra-low borrowing costs.
Overall house purchase activity has also increased by 10% in 2024, and Yorkshire Building Society expects to see 1.1 million transactions over the year, compared to the one million recorded in 2023. First-time buyers continued to drive the majority of purchasing activity, at 54%, similar to 2023.
However, according to the Society’s group economist Max Shepherd, the Government’s changes to stamp duty rules could potentially trigger a surge in completions in the first quarter of the year as first-time buyers and home movers rush to try to secure their homes before the stamp duty change increases the cost of doing so on 1 April. Once the change comes into force, it has the potential to put existing homeowners off selling, resulting in a double-whammy for first-time buyers by inflating house prices further out of their reach.
Max 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.
“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.”
