London first-time buyers: 63% buying jointly as house prices, deposits and interest rates remain high

 (Daniel Hambury/@stellapicsltd)
(Daniel Hambury/@stellapicsltd)

Almost two-thirds of first-time buyers are now teaming up with a partner, sibling or friend to get a foot on the property ladder after a decade where deposits and house prices have risen significantly.

This is a stark change from 2016 when sole first-time buyers were in the majority, accounting for 52 per cent of those who bought, according to Halifax research.

Since then mortgage rates have jumped from historic lows in the wake of Kwasi Kwarteng’s mini budget in 2022 and rising inflation.

Least affordable areas for first-time buyers

In addition, house prices have remained high; in London although the average first-time buyer deposits and house prices both fell slightly in 2023 (to £108,850 and £492,200 respectively) they were still 80 per cent and 85 per cent higher than a decade ago.

Indeed the research showed that eight of the 10 least affordable local authorities for first-time buyers were in London, lead by Islington with a house price to earnings ratio of 10.6; Brent and Harrow (both 10.4).

Hounslow, Barnet and Newham all have a ratio of 10.0, while Hammersmith and Fulham and Waltham Forest completed the least affordable list with a ratio of 9.6 times.

Unsurprisingly, flats, which tend to be the cheapest property type, made up 73 per cent of the homes sold to London first-time buyers in 2023, up from 59 per cent in 2013.

By comparison, the number of terraced houses sold to first-time buyers fell from 29 per cent in 2013 to 18 per cent a decade later and semi-detached homes accounted for just eight per cent of first purchases.

New buyers make up over half of all home loans

While first-time buyer numbers fell significantly in 2023, to 293,340 nationally, they accounted for more than half of all buyers with a mortgage, evidence of both a commitment to escape the toxic and expensive rental market and of the fact that they never experienced the cheap interest rates of the prior decade.

Kim Kinnaird, director, Halifax Mortgages said: “Following a record year in 2021, unsurprisingly in view of the wider economic environment, the number of first-time buyers joining the property market fell again in 2023 to around 293,000.

"Despite this drop, new buyers made up over half of all home loans. However, to get a foot on the ladder most people are now buying for the first time in joint names.”

“The overall fall in house prices we saw in 2023 will go some way to helping people get on the ladder for the first time – but these buyers are still dependent on a steady supply of properties in their price range, while they are faced with the continued pressure of saving for a deposit, when rent and living costs are high.”

Tom Bill, head of UK residential research at Knight Frank, said: “First-time buyers have been hit especially hard by rising mortgage rates.

“The sub-four per cent deals we increasingly hear about are typically for those with equity levels of 40 per cent or more.

“The government is likely to offer first-time buyers more financial support ahead of the election this year given that housing is a key political battleground and based on the belief that homeowners are more likely to vote Conservative.”