The share of homes purchased by first-time buyers in the UK is expected to decline for the first time in five years, as major banks pull low deposit mortgages off the market in response to the Covid-19 crisis.
Forecasts released by the property portal Zoopla show that, despite an increase in demand earlier this year, first-time buyers will account for around 33.9% of UK home purchases for 2020, up from a 10-year high of 34.9% in 2019.
If the forecasts prove to be correct, this will mark the first drop in home sales to first-time buyers since 2015.
The report says their ability to purchase property has been affected by the economic downturn caused by Covid-19, which has resulted in a reduction in the availability of higher-value mortgages.
In 2019, mortgages over 90% accounted for around a fifth of all home loans in the UK. But since the foreclosure, major mortgage lenders have started to pull out loans by more than 90%, fearing falling house prices and arrears. This left a handful of lenders like HSBC to shoulder much of the demand.
Earlier this month, HSBC announced that it was “temporarily reserving” mortgages worth more than 85% of a home’s value for customers changing interest rates so they could process the loan. Backlog of applications for low deposit mortgages, including from first-time buyers.
Existing homeowners looking to buy a new home are in a stronger position, and Zoopla now estimates that they will account for a greater proportion of home purchases than first-time buyers for all of 2020, at around 35%. It would be the first time that current homeowners account for the largest proportion of home sales since 2017.
This trend could last until 2021, with first-time buyers expected to account for 32.2% of new home sales, compared to 35.9% for existing owners.
Many homeowners are currently looking for more spacious accommodations to accommodate working from home during the pandemic.
Richard Donnell, Zoopla’s Director of Research and Insight, said: “A shift in the mix of buyers is supporting market conditions, with continued demand from existing stock-rich owners looking for more space. and a change of location.
“On the other hand, demand from first-time buyers is weakening. FTBs have been a driving force in home sales for the past decade. They remain a key buying group, but lower availability of higher-value mortgages and an increase in movement from existing homeowners means a shift in the mix of homebuyers in 2021. “