First-time buyers made up the largest share of home buyers last year, even as rising borrowing costs and the cost-of-living crisis hit their finances hard.
Buyers climbing the property ladder for the first time accounted for 53% of mortgage purchases, according to figures from the Yorkshire Building Society. This was up from 50% in 2021 and 41% a decade ago. Previous data showed that the proportion of first-time buyers who bought with a mortgage last reached 53% in 1995.
But the total number of first-time homebuyers fell 9% as the cost of borrowing soared and low-deposit mortgages disappeared from the market.
The Yorkshire Building Society estimated that the number of first-time buyers fell to 370,287 last year, compared with 405,320 in 2021. These levels were particularly high as a result of the temporary stamp duty cut.
Demand from new buyers was up about 5% from 2019 levels, before the pandemic. The last time the number of first-time buyers exceeded 400,000 was in 2006.
The figures were compiled from UK financial data and the mutual’s own estimates.
Continued interest from new buyers comes despite buyers facing higher borrowing costs and unaffordable prices. Mortgage fixed costs hit 14-year highs in October after the mini-budget forced borrowing costs to skyrocket, but began to level off around Christmas.
Data from the Resolution Foundation published in November showed that the lifetime cost of taking out a mortgage is now higher than at any time since 1974. The typical cost of a first home increased by 10% last year, or £25,621 , at £272,500 .
The threat of falling house prices in 2023 also means that borrowers who took out a low-deposit mortgage to buy a property last year could fall into negative net worth, meaning they have borrowed more than what your house is worth
Nitesh Patel, economist at the Yorkshire Building Society, said 2022 had started strong for new mortgage deals, before slowing down as economic uncertainty caused consumers to tighten their belts.
He said: “Demand from first-time buyers remains strong, even with home prices at record highs for much of the year and the country experiencing so much political and economic uncertainty.”
It added that economic uncertainty and rising borrowing costs could “keep prospective borrowers from making such a major purchase or cause lenders to adjust affordability,” leading to further declines in the number of first-time buyers in 2023.
Figures from Aviva, released in November, estimated that one million people under the age of 45 had ruled out buying a property amid pressures from the cost-of-living crisis.