The share of homes purchased by first-time buyers in the UK is expected to fall for the first time in five years, as major banks pull low-deposit mortgages from the market in light of the COVID-19 crisis.
According to forecasts released by property portal Zoopla, first-time buyers will comprise around 33.9% of home purchases for 2020, down from a 10-year high of 34.9% in 2019 – that’s despite a surge in demand earlier in the year.
If the Zoopla forecasts prove correct, the figures will mark the first decline in house sales to first-time buyers since 2015.
The report says first-time buyers’ ability to purchase property has been hampered by the economic downturn caused by the COVID-19 crisis, which has seen a reduced availability of higher loan-to-value mortgages.
Fears of falling house prices
In 2019, 90%-plus mortgages accounted for around a fifth of all home loans in the UK.
Since the initial national lockdown in March, however, major mortgage lenders have begun to withdraw from 90%-plus lending, citing fears of falling house prices and arrears.
Existing homeowners seeking to purchase a new house look to be a stronger position that first-time buyers, and Zoopla estimates they will account for a larger proportion of home purchases than first-time buyers for the whole of 2020 – at around 35%.
It would be the first time existing homeowners account for the largest proportion of home sales since 2017.
Zoopla says that trend may extend into 2021, with first-time buyers expected to account for 32.2% of new home sales – compared with 35.9% by existing homeowners.
Many homeowners are now also looking for more spacious housing to accommodate a shift to home-working caused by the ongoing COVID-19 crisis.
Zoopla’s research and insight director, Richard Donnell, said: “A change in the mix of buyers is supporting market conditions, with sustained demand from equity-rich existing owners seeking more space and a change in location.
“In contrast, first-time-buyer demand is weakening.
“First-time buyers have been a driving force of housing sales over the last decade – they remain a key buyer group, but lower availability of higher loan-to-value mortgages and increased movement by existing homeowners means a shift in the mix of home buyers into 2021.”
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