London has seen a 24 per cent decline in the number of first-time buyers entering the market in the last year as record high mortgage rates crush home-ownership dreams.
According to a new study by Halifax, the South-East, which is home to a number of commuter hotspots such as Surrey, saw the largest fall in the last year, with 25 per cent fewer first-time buyers.
Soaring mortgage rates and a rocky economic sentiment has battered the health of the housing sector in the last 12 months.
While rates are coming down – the average five-year fixed mortgage is now at around 5.67 per cent – many first time buyers are struggling with affordability as they also navigate rising living costs and wage stagnation.
An end to the Help to Buy and Help to Buy London schemes, which was stopped last year, also halted many would-be-buyers’ plans to enter the market.
Across the UK, the number of first-time buyers fell 22 per cent between January and August this year, compared to the same period in 2022.
The average price of a first home is now £288,000 – down just two per cent in the past year.
However, in London the figure is significantly higher where first-time buyers face an average property price of £448,000 – nearly 11 times average annual earnings in the area.
Chris Druce, senior research analyst at Knight Frank, said: “With interest rates at a 15-year high, affordability is proving to be a significant drag on activity in the UK residential market. First-time buyers, who are typically unable to access the best mortgage rates when starting out, are particularly exposed to this.
“While we expect average prices to decline by 10 per cent through this year and next as the market continues to cool after a pandemic inspired boom, the challenge of getting onto the property ladder will remain significant. With the political party conference season underway, fresh polices to support first time buyers are needed.”
He added: “This is because existing measures – such as the doubling of the nil-rate stamp duty threshold for first time buyers – are helpful but time-limited. A replacement for the expired Help to Buy scheme, which at its peak supported 50,000 new build sales annually in England, would prove popular, too.”