At the same time, first-time buyers in the UK are scrambling to complete their home purchases. Firms are keen to outpace the substantial stamp duty holiday which comes into effect on April 1. Encumbered by high interest rates, new homeowners are experiencing a unique urgency. That has induced a big increase in property completions, highlighting their continued toughness in the face of broader economic unknowns.
Nationwide’s latest data, published today, recorded a record jump in first-time buyer completions. In March, these completions jumped a staggering 113% over the same month last year. We see a dramatic change in borrowing behavior. For first-time buyers this is now almost 31 years on average – down from just under 28 years ten years ago. This extended borrowing period reflects the challenges many face in affording homeownership, especially as they often enter the market in their 30s.
Kevin Peachey, the Cost of Living correspondent, notes that buyers in England and Northern Ireland pay stamp duty on homes costing over £125,000, while first-time buyers are exempt on properties costing less than £300,000. This exemption has inspired countless numbers to rush to make their purchases before the end of the exemption, which is likely to bring new costs.
Private sector completions were up 140% YoY as existing homeowners played an outsized role in this warm property market bubble. Mortgage approvals for house purchases fell for the fourth consecutive month in April. This drop points to some troubling headwinds for would-be buyers, even as activity is escalating.
Robert Gardner, chief economist at Nationwide, helped to shed some light on current market conditions. He stated, “Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.” This latest sentiment could bring comfort to first-time buyers looking to buy in a housing market that’s quickly evolving.
Perhaps not surprisingly, in addition to increasing transaction volume, house prices have continued to appreciate. The typical home is currently £273,427 – up 3.5% in the last 12 months. Constructive news on the housing front includes a very modest increase from Nationwide of just 0.5% in house prices in May.
For decades, lenders have been providing mortgages with terms as long as 40 years. As home values climb, first-time buyers are stretching their budgets to buy their first homes. A recent review by UK Finance highlighted that “even as interest rates have come down, this measure of affordability has not eased significantly, with rising house prices largely offsetting any lowering of payments through falling rates.”