Pocock & Shaw Estate Agents

Number of first-time buyers hits 20-year high

Posted on Monday, January 31, 2022

Record year for first-time buyers stepping onto the ladder, as more than 400,000 buy their first home. The highest number in 20 years.

Number of first-time buyers hits 20-year high

Key takeaways

  • The number of people taking their first step on the property ladder soared to a 20-year high in 2021
  • An estimated 408,379 people bought their first home during the year, 35% more than in 2020
  • First-time buyers accounted for 50% of all people purchasing a property with a mortgage in 2021, up from a low of 36% in 2007 during the global financial crisis

The number of people taking their first step on the property ladder soared to a 20-year high in 2021.

An estimated 408,379 people bought their first home during the year, 35% more than in 2020, according to Yorkshire Building Society.

It was the first time that first-time buyer numbers have broken through the 400,000 threshold since 2006, while the figure was also more than double the 200,000 people who purchased their first home each year between 2008 and 2012.

First-time buyers accounted for 50% of all people purchasing a property with a mortgage in 2021, up from a low of 36% in 2007 during the global financial crisis.

But numbers still have some way to recover to reach the previous first-time buyer peak seen in 2002, when 531,800 people bought their first home.

 

Why is this happening?

 

A combination of high levels of employment and low interest rates have helped to drive the increase in first-time buyer numbers.

There has also been a significant rise in the number of mortgages available for people with only small deposits, after lenders began offering 95% mortgages again.

Many banks and building society pulled the deals in 2020 during the early stages of the Covid-19 pandemic. But the government-backed mortgage guarantee scheme has increased confidence once more.

There are now more than 350 mortgages available to buyers borrowing 95% of their home’s value, while interest rates on these products have fallen to a record low.

At the same time, people purchasing their first home have also benefitted from a raft of government schemes.

Anecdotal evidence also suggests many first-time buyers were able to save more towards a deposit during the pandemic due to decreased expenditure during successive lockdowns.

 

Who does it affect?

 

The figures are great news for aspiring first-time buyers as they show mortgage lenders are once again happy to lend to this sector of the market.

They are also good news for people who want to trade up the property ladder.

First-time buyers play a vital role in the market through buying entry-level properties, enabling the owners of these homes to trade up to bigger properties.

 

What help is available to first-time buyers?

 

The government’s flagship scheme to help first-time buyers is the Help to Buy equity loan scheme.

It enables people to purchase a new-build property with a 5% deposit, which the government tops up with a 20% equity loan that's interest-free for five years.

Other initiatives include First Homes under which first-time buyers, key workers and local people, can purchase a home at a 30% discount to its market price, while the 95% mortgage guarantee scheme helps buyers get a mortgage with just a 5% deposit.

There is also help for people saving for a deposit. First-time buyers can take out a Lifetime ISA, into which they can save £4,000 a year, which the government tops up with a 25% bonus, up to a maximum of £1,000 annually. 

The money must be used to either purchase a first home or for retirement.

Meanwhile, first-time buyers continue to be exempt from stamp duty on the on the first £300,000 of a purchase on homes costing up to £500,000.

Property price

Percentage of stamp duty paid

£0 - £300,000 

0%

£300,000 - £500,000 

5%

£500,000+

Normal stamp duty rates apply

First-time buyers’ stamp duty break; how much can I save?

The government recently launched the Own your Home website offering information on all of its various schemes to help potential buyers decide which one is right for them.

Source Zoopla