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First-time Buyer

Average first-time buyer mortgage loan reaches yearly high of £215,800

Nick Cheek
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Nick Cheek

First-time buyers took out an average mortgage of £215,794 in May, the highest figure so far for a year, market analysis from a bank has shown.

First Direct’s first-time buyer market snapshot showed that the last high for a first-time buyer mortgage was in June last year when this came to £216,547. 

This was £25,711 or 13.5% higher than the lowest value seen last November at a total of £190,083. 

The average value of a first-time buyer mortgage has increased steadily over the year, despite house prices falling since September. 

Since the start of 2023, the average loan size for first-time buyers rose by £20,364, climbing from averages of of £195,430 in December and £194,582 in January.  

First Direct said this trend of rising mortgage values was consistent across the market. The average home mover loan rose to £257,214, a high since September and the average remortgage was £216,408, a peak since June 2023. 

Carl Watchorn, head of mortgages at First Direct, said: “The contrast between the rising value of loans, against the backdrop of a small decrease in house prices, is conflicting: despite a static housing market, first-time buyers are having to borrow more. It may indicate that people are applying for mortgages with smaller deposits – partly due to the impact of the rising cost of living. 

“Another consideration is that the current climate means buying a property simply isn’t affordable for many aspiring first-time buyers who are delaying getting on the ladder, which means that the average is being pushed up by the smaller demographic of people who can afford to do it.   

“This also shows that there is still a really strong appetite amongst people to get on the housing ladder, despite some of the challenges posed by high interest rates and mortgage affordability.” 

Loan application values rise 

The value of mortgage applications made by first-time buyers, homemovers and remortgagors totalled £21.5bn in May, nearly double the values of £11.5bn in November and £11.2bn in December 2022. 

First Direct’s analysis showed that this was the second highest total value for applications since March, which was at a peak of £26.6bn so far this year. The bank said the gap between application values seen in 2023 was narrowing, despite May’s total being 22 per cent down on £27.7bn during the same month last year. 

The first-time buyer market was worth £6.8bn in May, which was up by £530m on April. 

Watchorn added: “Mortgage application volumes do fluctuate throughout the year. The start of the first quarter is usually a quieter period, and this is followed by a large spike in March, which tends to be one of the busiest months of the year. The second and third quarters of the year tend to be particularly busy in the mortgage market, before a subdued end to the year. So far, it looks like 2023 is following this trajectory, with high volumes noted since March. 

“However, the impact of rising interest rates has been seen across the market. The volumes seen late last year have been the lowest in recent years and were heavily impacted by the mini-economic crisis seen in September. In recent weeks, the increasing rate environment has once again made headlines and will likely impact volumes as some customers find it more difficult to obtain a mortgage. Others may simply defer buying a new property due to the higher monthly payments that will accompany the lending.”