First-time buyers save £20,300 below local market average

People buying their first home save on average £20,300 (8%) below local market prices, rising to savings of £137,800 (26%) in London, according to a new analysis by Zoopla.

This is despite first-time buyers paying on average £2,800 (1.2%) more for a property compared with a year ago, the property website said.

Buyers are also having to contend with higher mortgage repayments, following increases in mortgage rates throughout 2023.

After purchasing their home, the average first-time buyer is now paying a mortgage bill that is 27% -- or £213 per month -- higher than if they had bought in Q4 2022.

However, at £990 per month, the average mortgage repayment is still lower than the UK average monthly rent of £1,221 -- highlighting the extent to which raising a deposit remains a barrier to entry for many would-be buyers.

Chancellor urged to help first-time buyers

Ahead of the Budget on 6 March, property website Rightmove has called on Chancellor Jeremy Hunt to introduce more support to help first-time buyers onto the property ladder.

Activity levels and sales among first-time buyers are lagging behind the rest of the market, weighed down by the challenges of high mortgage rates, cost-of-living pressures and saving for a deposit.

"Rightmove's whole-of-market data shows that it's the first-time-buyer segment who could use the most support this spring, and well-thought-out initiatives to help to get more would-be first-time buyers onto the ladder would be welcome," said Tim Bannister, director of property science at Rightmove.

Market activity on the increase

Across the whole of the property market, growing optimism about mortgage affordability is reflected in an increase in activity of both buyers and sellers on Rightmove. The property portal has reported 7% more new listings coming to market than last year, and a 7% rise in the number of buyers enquiring.

Figures for the first six weeks of 2024 show that agreed sales were 16% higher than over the same period last year, and 3% higher than in the more normal market of 2019.

However, the market remains price-sensitive, with many buyers very budget-conscious. Rightmove said that the market appears to be operating at two speeds, with properties that are priced accurately being snapped up while over-priced properties are "left on the shelf".

'Assess all the options'

First-time buyers should keep their options open when it comes to the type of home they are looking for and the location where they want to buy, said Izabella Lubowiecka, senior property researcher at Zoopla.

More than half (55%) of first-time buyers enquire about homes within a five-mile radius from where they are currently based, and only 27% look for their first home 10 miles or more from where they currently live, down from 29% a year ago as the number of homes on the market increased, Zoopla found.

"We expect more first-time buyers to come to market in 2024, particularly in the second half of the year thanks to a combination of reduced mortgage rates, earnings growth and improved affordability," Lubowiecka said. "But the reality is that many would-be buyers might be able to get on the ladder now by considering different property types or alternative locations that offer better value for money.

"First-time buyers are in a stronger position in the current buyer's market so we encourage them to be resourceful and assess all the options available to them."