First-time buyers are taking a significantly larger share of the mortgage market, according to new figures from broker Alexander Hall, as improving economic conditions and falling interest rates spur renewed activity among new entrants to the property ladder.

In 2024, first-time buyer mortgage applications accounted for 28.7% of all activity at Alexander Hall, up from 23.3% in 2023 and 22.3% in 2022. With the broker handling more than £2.25 billion in lending last year, the shift marks a meaningful change in market dynamics.

Total application volumes remained steady over the three-year period, suggesting that the growth in first-time buyer activity has offset a decline in applications from home movers and buy-to-let investors.

FAVOURABLE ENVIRONMENT

The rise coincides with a markedly more favourable environment for new buyers. Since July 2024, the Bank of England has steadily reduced its base rate from 5.25% to 4.25%, easing borrowing costs. At the same time, wage growth has improved and house price inflation has slowed, with prices stabilising after sharp gains in 2022.

Affordability has also improved markedly. In 2024, the average first-time buyer earned £31,717 and purchased a home priced at £226,744 – the most affordable ratio in a decade.

STAMP DUTY CHANGES

Temporary changes to stamp duty rules provided further stimulus at the end of 2024. Between October and March, first-time buyers paid no stamp duty on the first £425,000 of a property, provided the total value was under £625,000. That threshold has now reverted to £300,000, prompting many to accelerate their buying plans late last year.

Alexander Hall’s data also points to shifting behaviour in product selection and lender engagement. First-time buyers used just 31 mortgage lenders in 2024, down from 35 in 2023, despite the rise in applications – suggesting fiercer competition among fewer providers.

The trend signals growing confidence in further rate cuts from the Bank of England with 2-year fixed-rate mortgages having surged in popularity, with 61% of first-time buyers opting for them in 2024, up from 37.5% two years earlier.

PRODUCT INNOVATION

Stephanie Daley, director of partnerships at Alexander Hall, said: “First-time buyers are becoming more prominent players in the mortgage market, as conditions are improving.

“Rising incomes, more modest rates of house price growth, and lower mortgage rates are all making the market more favourable.

“It’s also fair to say that first-time buyers, in particular, have benefited from a greater range of lender improvements and product innovation in recent years, which has provided them with a greater range of ways to climb the ladder.”