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First-time buyer lending set to hit £71bn by 2025

First-time buyer lending set to hit £71bn by 2025
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Lending to first-time buyers is predicted to reach £71bn by 2025, according to the new First Time Buyer Economy Report from a leading mutual.

This figure is 26% higher than the estimated £56.5bn lending to FTBs for the whole of 2023, Coventry Building Society noted.

The lender added that the first-time buyer economy as a whole – including both lending and spending – could be worth £74.1bn in two years.

Its report, produced in conjunction with the Centre for Economics and Business Research (CEBR), looked at the overall value that FTBs bring to the UK economy.

This includes not only mortgage lending but what they spend on extra costs relating to buying their home.

Value-added buyers

On top of the £71bn in lending, FTBs are expected to spend an annual total of £3.1bn on extra purchasing costs by 2025.

This is made up of fees and moving costs, for example, alongside renovations and redecorating.

FTBs currently spend an average of £3,400 on upfront costs, including moving and legal fees, as well as surveyor, valuation and mortgage fees.

In addition, they will spend an estimated £4,900 individually on renovating and redecorating their home within 12 months of moving in, making the combined total spend on top of their mortgage over £8,000 (£8,300).

House prices on the rise

The report also revealed that the average first-time buyer house price in the UK is set to rise to £236,456 in 2025, from £232,651 in 2023.

It also noted that buyers paying a 10% deposit on an average-priced home in 2025 will need to save £380 more than buyers in 2023 – with the deposit going from £23,265 to £23,646.

Jonathan Stinton, head of intermediary relationships at Coventry for intermediaries, said: “First-time buyers have accounted for almost a third of all UK property transactions over the last five years and are a huge contributor to the UK economy.

“As the mortgage market and economy stabilise in the next couple of years, we will see even more first-time buyers ready to enter the market.”

But this essential segment of the mortgage market needs more support to understand the full costs of homebuyers, according to Coventry’s report.

Greater guidance needed

Over a third (36%) of FTBs said they need more guidance on the additional costs of buying a house.

Many are still unaware of the upfront costs they need to budget for before applying for a mortgage, with only 19% of those aged between 18-24 aware of mortgage product fees, for example.

Brokers are well placed to fill this advice gap, according to Stinton. He said: “It’s clear that people taking their first step onto the property ladder need more guidance and support during the mortgage journey, particularly around the costs associated with buying a home.

“Brokers are essential and because of their experience are in the best position to provide this vital information to ensure first-time buyers are fully prepared for this financial and personal milestone.”