Record 22% housing market share for first-time buyers


First-time buyers took a record 22% share of the housing market in the fourth quarter of 2016, the highest since records began in 2007.

A press release from the Bank of England published on the 14th of March shows that the percentage of first-time buyers is rising, with figures set to go even higher later in the year. The fourth quarter of 2016 saw £62.8 billion of new residential loans taken out, which was a 2.6% decrease compared to the previous three months.

Adrian Anderson, the director of property finance specialist Anderson Harris, commented: “The pick-up in first-time buyers, in their highest numbers since the time series began in 2007, is hugely encouraging. First-time buyers are the lifeblood of the market and with lenders offering a range of high loan-to-value deals, as well as more innovative products where family members can help offspring onto the ladder, it looks as though this trend will continue.”

Why are first-time buyer numbers increasing?

The increase in first-time buyers is largely attributed to the prevalence of gifts and loans from parents and grandparents to help young people get onto the housing ladder. For example, research conducted by the Government’s Social Mobility Commission showed that the proportion of first-time buyers relying on the ‘Bank of Mum and Dad’ had risen to a high of 34.1% between 2013 and 2014. That figure is expected to reach 40.6% by 2024.

A further 9.6% relied on an inheritance to save for a deposit, meaning that only 56.3% of first-time buyers had purchased a house without any significant financial assistance from a relative.

The report suggested that a helping hand could make an average difference of 2.6 years, allowing young homeowners to spend less time saving for a house and more time living in it.

What about Help to Buy schemes?

The Government has invested a lot of attention to first-time buyers in recent years, with Help to Buy ISAs offering a 25% incentive to savers. The Lifetime ISA (or LISA as it is commonly called) works in a similar way, with savers between the age of 18-40 able to save up to £4,000 per year with the Government adding a 25% bonus. These savings can then be put towards a deposit for a house costing up to £250,000 (or £450,000 inside London) in the case of the Help to Buy ISA, or £450,000 in the case of the LISA.

The benefits of these ISAs, combined with the rising number of people reliant on family gifts or loans, could explain why the percentage of first-time buyers is predicted to rise.

This promising news may come as a relief to some young people, with one in four 18-34 year olds believing that they will never own a home (source: Halifax). The number of young first-time buyers may be rising, but there is still some way to go. In 1990, 39% of 20-24 year olds were able to buy a home, compared to 10% in 2015. Whether this gap will ever close is yet to be seen, but the press release from the Bank of England definitely marks a step in the right direction.