The number of first-time buyers entering the housing market has risen sharply this year but new data from Yorkshire Building Society suggests that growth is now losing momentum – a sign that affordability pressures are once again weighing on aspiring homeowners.

Analysis of CACI data by the mutual shows that first-time buyer mortgage applications rose 9.3% year-on-year in the third quarter of 2025, with 123,149 applications recorded between July and September compared with 112,630 in the same period last year.

However, that marks a slowdown from the 12.4% increase seen between Q2 2024 and Q2 2025.

Across the first nine months of this year, applications totalled 380,479, up 11.4% on the same point in 2024 – signalling that demand, while strong, is beginning to plateau.

IMPROVED LENDING CONDITIONS

The slowdown follows a period of improved lending conditions driven by looser stress-testing and loan-to-income rules, as well as a modest cooling in mortgage rates.

Yet despite those changes, Yorkshire Building Society warned that high property prices and the cost-of-living squeeze are still locking many potential buyers out of the market.

In its Home Improvements policy paper, the mutual urged the Government and regulators to take further action to support affordability.

Proposals include new stamp duty incentives for first-time buyers, a reformed Help to Buy scheme and a review of lending regulations to make mortgage access easier for lower-income and self-employed borrowers.

RESILIENT MARKET

Max Shepherd, group economist at Yorkshire Building Society, said: “These latest figures show the market remains resilient despite the recent changes in stamp duty thresholds.

“First-time buyers are continuing to show remarkable resilience despite ongoing macroeconomic and affordability challenges.

“The positive changes we’ve seen so far this year – including regulatory updates around stress-testing requirements and loan-to-income limits which have allowed mortgage providers to lend more – are likely to be playing a part in that.”

EARLY WARNING SIGN

But he added:  “However, the growth of this important borrower group is showing signs of slowing amidst the headwinds they continue to face around high house prices and cost-of-living challenges which are preventing them from building deposits. This could be an early warning sign that they need more support from the Government and mortgage industry.”

The warning comes as economists debate whether the recent uptick in mortgage approvals represents a sustained recovery or a temporary rebound driven by pent-up demand.

AFFORDABILITY STRETCH

With inflation falling faster than expected and interest rates expected to ease further in early 2026, lenders have begun cutting mortgage rates – but affordability remains stretched after years of house price growth outpacing wage increases.

Industry analysts say the government’s November Budget will be critical in determining whether first-time buyer momentum can be maintained.

Any tightening of stamp duty thresholds or changes to mortgage regulation could further dampen demand in the early part of next year.