BROKERS and property experts have said a combination of improving affordability, growing consumer awareness of the costs of moving and issues with leasehold properties is resulting in more first-time buyers skipping the first rung of the property ladder and buying homes that they can grow into — rather than quickly grow out of.
One broker said we are witnessing “a significant shift in buying habits” as lender innovation empowers people to borrow more, while a portfolio landlord said the affordability shift “spells disaster for the valuation of city centre flats, which are rapidly becoming the sub-prime assets of the UK housing market”.
In its house price index published this morning, Nationwide’s Chief Economist, Robert Gardner, said “all parts of the UK, with the exception of Northern Ireland, saw an improvement in affordability over the past year”.
He continued: “Our main affordability benchmark shows that a prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 32% of their take-home pay – slightly above the long-run average of 30% and well below the recent high of 38% recorded in 2023.”
Bypassing costs
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said he is seeing a definitive trend: “It’s now crystal clear that more savvy first-time buyers are looking beyond traditional starter homes, such as flats, and setting their sights on houses as they are able to benefit from improved affordability. This also enables them to bypass expensive stamp duty and other moving costs associated with repeated buying and selling.
“Gone are the days of moving every two or three years to climb the property ladder. The market is starting to see a significant shift in buying habits.”
Andrew Montlake, CEO at London-based Coreco, agreed: “One of the benefits of the new lending landscape is that first-time buyers are feeling less constrained on the type of property they can now afford.
“More competitive rates, higher income multiples and greater lender flexibility have allowed borrowers to look at a longer term “dream home” rather than having to compromise on too many of their requirements, which often put them off buying altogether.
“As mortgage payments now compare more favourably with rental costs, we are seeing a new generation of first-time buyers eager to get onto the property ladder, which is creating a more competitive market. Getting in early will be the key as increased demand is sure to inspire further house price increases.”
Extra costs and red tape
Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Lifetime Wealth Management, said: “People are increasingly alive to the punitive costs that come with moving home and improved affordability means a growing number are skipping the first rung on the ladder and moving straight to the second.
“A lot of people are also very wary of leasehold properties, which come with extra costs and red tape. Even if the mortgage is slightly bigger by buying bigger, many are opting for the peace of mind of buying a house they can grow into if it’s affordable, which increasingly it is.”
Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, added: “From our experience in South Wales, improved affordability and recent lender changes over the past six months have started to make a positive difference for buyers.
“With mortgage rates becoming more competitive and lending criteria improving, many people are now finding it a little easier to borrow comfortably and plan their next move with confidence.
“This has allowed some buyers to look at more favourable properties, such as larger homes, in better locations, or freehold houses, rather than being limited to smaller leasehold flats.
“In a region where property prices remain relatively accessible, these changes have been especially helpful for first-time buyers and growing families who are looking for long-term stability and value.
“Leasehold flats will always play an important role in the market, particularly in town and city centres. However, as affordability continues to improve, some buyers are naturally choosing options with fewer ongoing costs and greater security.
“Overall, these recent improvements are helping buyers feel more confident, make clearer decisions, and move forward with greater peace of mind.”
A rising tide lifts all boats
Jean Pierre Kalebic, Senior Mortgage Advisor at Derby-based onlinemortgageadvisor.co.uk, said the government encouraging lenders to relax their lending rules has had a huge impact on the current borrowing landscape and is resulting in “many people being able to buy properties that may have been completely out of reach just a few months ago”.
He added: “This, of course, will benefit the whole of the market. Although some people might now be able to afford to buy a freehold house instead of a leasehold flat, there will now be many more new first-time buyers coming to the market who may not have been able to afford to get on the property ladder previously. A rising tide lifts all boats.”
City centre flat values vulnerable
Like Eatenton, Kundan Bhaduri, Portfolio Landlord at London-based The Kushman Group, said buyers are wary of leaseholds. He also warned that the value of city centre flats could come under pressure if the current shift in buying habits continues.
He said: “Buyers are stretching themselves to the absolute limit to secure a freehold house, not because they are greedy for space but because they are terrified of becoming trapped in a leasehold nightmare where they have no control over their costs.
“They have also done the maths on the transactional friction of moving, namely stamp duty, legal fees and estate agent commissions, and realised that moving every three years is a mug’s game in a high-tax economy.
“This shift spells disaster for the valuation of city centre flats, which are rapidly becoming the sub-prime assets of the UK housing market. We on the other hand are buying a lot of these flats but only if we can buy the entire building with freehold included so we keep control of the entire asset portfolio.”
