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First-time buyers losing out as lenders drop high LTV mortgages, Zoopla survey shows

Existing owners set to be largest home-buying demographic for first time in four years as families flee city and flight to the country continues.

Richard Reed


The share of homes purchased by first-time buyers in the UK has fallen for the first time in five years, according to the latest Zoopla House Price Index.

The research shows their ability to buy property is starting to be hit by COVID-19, the recession, and reduced availability of higher loan-to-value mortgages.

The drop-off in demand correlates directly with when lenders started to withdraw high LTV mortgage products in early June.

The reduction follows a 10-year high in the share of sales to first-time buyers recorded in 2019, when around a fifth of all mortgages for home purchase were at or above 90% LTV.

Trend reverses

The findings from Zoopla suggest the remainder of 2020 and the start of 2021 are set to witness a reversal of that trend, with a greater share of moves by existing home-owners who tend to move less often. The results show that:

  • Existing homeowners are now set to be the largest buyer demographic in 2021 for the first time since 2017;
  • First-time buyer demand is set to weaken further over the rest of 2020 and into 2021;
  • The search for space and the once in a lifetime re-evaluation of what a home is worth in the wake of COVID means demand from existing homeowners shows no sign of weakening and remains 37% higher than pre-COVID levels, and 53% higher than this time last year.

Looking at it on a regional basis, the figures show that demand among first-time buyers has grown the least in London (1.8%), Yorkshire and the Humber (+4.8%), and the North West (9.7%) in September 2020, compared with the first quarter of the year.

Regional variations

In London, 90% LTV lending is limited to those on high incomes or those with larger deposits. Overall, first-time buyer demand in London is just 1.8% up in comparison to demand from existing homeowners, which has increased by 41% compared with Q1.

First-time buyer and existing homeowner demand has diverged the most in the South-East (48.5%), Scotland (46.4%), and the South-West (44%) since the start of the year.

House-price growth continues on an upward annual trajectory of +2.6% as demand outpaces supply. At a region and country level, the annual rate of growth ranges from +1.7% in the North-East to +3.3% in the North-West, Yorkshire and the Humber, and Wales. Nottingham and Manchester are recording price inflation of more than 4% per annum.

Richard Donnell, research and insight director at Zoopla, 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. FTBs 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 home-owners means a shift in the mix of home buyers into 2021.”

Listen to Zoopla CEO Charlie Bryant’s interview on this morning’s Radio 4 Today programme – from 6.16am.


September 28, 2020

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