Yahoo Finance UK house buying activity drops almost a third in a year as interest rates bite
New data shows that house purchaser numbers have declined 30% since the same time last year, as high mortgage rates continue their downward pressure on the UK housing market.
The number of first-time buyers has declined 21% on 2022, down to 290,000 from 370,28, according to Yorkshire Building Society (YBS) data.
This year’s fall in first-time buyer numbers also follows the 20-year high of more than 400,000 in 2021, which was fuelled by government initiatives including stamp duty incentives, changing working habits and low borrowing costs post-pandemic.
However, the ratio of first-time buyers in the mortgage market grew slightly in 2023, at 54% of new house purchase activity, compared to 53% in 2022 and 50% two years ago.
The ratio is significantly higher than the 41% recorded a decade ago.
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The data was based on UK Finance data to September 2023, with October, November and December 2023 volumes estimated by Yorkshire Building Society, in line with previous first-time buyer patterns.
“This demonstrates a positive ‘can-do’ sentiment with first-time buyers cutting their cloth in order to get on the housing ladder," said YBS director of mortgages Ben Merritt.
There may be some positive signs around the corner, according to YBS group economist Max Shepherd. “Current market expectations suggest several rate cuts in 2024, which would ease mortgage rates in the first half of the year," he said.
“However, this isn’t all good news, as interest rates falling in this way reflects the poor health of the economy overall, which could mean low growth and higher unemployment, which would only increase the urgency around ensuring a concerted approach to supporting first-time buyers."
Read more: UK house prices fell 1.8% this year, as interest rates squeeze mortgage affordability
The data comes alongside a December prediction that house prices will fall further in 2024. Housing platform Rightmove said it expects asking prices to track around 1% lower nationally by the end of next year, as the market continues to normalise after post-Covid freneticism.
Sellers will likely have to price more competitively to secure a buyer next year and agents will have to work harder especially when it comes to first-time buyers as affordability remains stretched.
Zoopla also recently published its house price index for November showing houses were being sold at steep discount. In London properties are selling for £25,000 less than the asking prices, while in the rest of the country sellers were lowering prices by £18,000.
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