To obtain a mortgage, first-time homebuyers in the United Kingdom (UK) need to save a deposit amounting to about 19 percent of the property purchase price. The higher the property value and the loan amount, the higher the deposit. In 2023, the average first-time buyer deposit in the UK was about 53,414 British pounds, but in the most expensive region, Greater London, the deposit amount was more than double. The share of the deposit was also much higher than in other regions in the UK. How has the house price for first-time buyers changed over time? Housing bought by first-time buyers has become increasingly more expensive since 2000, making it harder for renters to get on the property ladder. By 2023, the average house price had tripled. The price also varied in different regions, with the North East being the least expensive and Greater London – the priciest. Which are the most affordable areas for first-time buyers? While housing in certain areas can be pricy, this does not necessarily make it unaffordable, as the standard of living may also be higher. In 2021, the most affordable towns for first-time buyers were found in the North West region (Burnley) and Scotland (East Ayshire, North Ayshire, Inverclyde, West Dunbartonshire).

Despite the Office for National Statistics (ONS) reporting that the actual average deposit required to buy a home was 44 thousand British pounds (GBP), Santander's survey of potential first-time homeowners found the average target deposit was in some cases much lower. Even in London, where the average property price in early 2019 was over 460 thousand British pounds, potential first-time homeowners had a target deposit of around nine percent of the property price (39.5 thousand GBP).

The issue with having a lower deposit for a new home is that it puts buyers into a higher loan-to-value mortgage ratio. Those in the North East looked to achieve the highest deposit to property price ratio at sixteen percent.

On average, first-time homebuyers In the United Kingdom (UK) saved up 19 percent of the home price for a down payment in 2023, amounting to close to 53,000 British pounds. In Greater London, which was the priciest region to buy a home, the down payment was higher, at 22 percent.

Mortgage rates increased at a record pace in 2022, with the 10-year fixed mortgage rate doubling between March 2022 and December 2022. With inflation increasing, the Bank of England introduced several bank rate hikes, resulting in higher mortgage rates. In September 2023, the average 10-year fixed rate interest rate reached 5.1 percent. As borrowing costs get higher, demand for housing is expected to decrease, leading to declining market sentiment and slower house price growth. How have the mortgage hikes affected the market? After surging in 2021, the number of residential properties sold declined in 2022, reaching close to 1.3 million. Despite the number of transactions falling, this figure was higher than the period before the COVID-10 pandemic. The falling transaction volume also impacted mortgage borrowing. Between the first quarter of 2023 and the first quarter of 2024, the value of new mortgage loans fell year-on-year for fourth straight quarters in a row. How are higher mortgages affecting homebuyers? Homeowners with a mortgage loan usually lock in a fixed rate deal for two to ten years, meaning that after this period runs out, they need to renegotiate the terms of the loan. Many of the mortgages outstanding were taken out during the period of record-low mortgage rates and have since faced notable increases in their monthly repayment. About five million homeowners are projected to see their deal expire by the end of 2026. About two million of these loans are projected to experience a monthly payment increase of up to 199 British pounds by 2026.

Since 2015, the gap between the cost of buying a home and renting has grown, with homeownership becoming increasingly less affordable. In the third quarter of 2024, the house price to rent ratio in the UK stood at 114.6. That meant that house price growth has outpaced rental growth by nearly 15 percent between 2015 and 2024. The UK's house price to rent ratio was slightly below the average Euro area ratio. House price to income ratio in the UK Another indicator for housing affordability is the house price to income ratio, which is calculated by dividing nominal house prices by the nominal disposable income per head. The ratio saw an overall increase between 2015, which was tthe base year, and 2022. After that, the index declined, but remained close to the average for the Euro area. Is it more affordable to rent or buy? There are many things to be considered when comparing buying to renting, such as the ability to qualify for a mortgage and whether prospective homebuyers have sufficient savings for a deposit. Generally, purchasing a home is more affordable than renting one. However, the average monthly savings first-time buyers can achieve have been on the decline. In East of England, where house prices have increased rapidly over the past few years, it was cheaper to rent than to buy in 2022.

In 2022, house price growth in the UK slowed, after a period of decade-long increase. Nevertheless, in August 2024, prices reached a new peak, with the average home costing close to 290,000 British pounds. That figure refers to all property types, including detached, semi-detached, terraced houses, and flats and maisonettes. Compared to other European countries, the UK had some of the highest house prices. How have UK house prices increased over the last 10 years? Property prices have risen dramatically over the past decade. According to the UK house price index, the average house price has grown by over 50 percent since 2015. This price development has led to the gap between the cost of buying and renting a property to close. In 2023, buying a three-bedroom house in the UK was no longer more affordable than renting one. Consequently, Brits have become more likely to rent longer and push off making a house purchase until they have saved up enough for a down payment and achieved the financial stability required to make the step. What caused the decline in house prices in 2022? House prices are affected by multiple factors, such as mortgage rates, supply, and demand on the market. For nearly a decade, the UK experienced uninterrupted house price growth as a result of strong demand and a chronic undersupply. Homebuyers who purchased a property at the peak of the housing boom in July 2022 paid 14 percent more compared to what they would have paid a year before. Additionally, 2022 saw the most dramatic increase in mortgage rates in recent history. Between December 2021 and December 2022, the 10-year fixed mortgage rate doubled, adding further strain to prospective homebuyers. As a result, the market cooled, leading to a correction in pricing.

In 2024, the average age of recent first-time buyers in London was slightly higher than the England average. Across the UK, first-time buyers accounted for approximately 290,000 home sales. First-time buyer prices and mortgages In London, the average value of a mortgage for first-time buyers was far higher than all other regions in the UK. Apart from the initial cost of a down payment, those that can afford to, see monthly payment savings against those renting. In certain parts of the country, annual savings of buying against renting saw first time buyers amounted to over two thousand British pounds. Help to buy To encourage first-time buyers, the UK government started the "Help to buy" scheme. The scheme sees people saving for a first-time home receive a 25% bonus to their savings when purchasing a house valued at 250,000 British pounds (450,000 British pounds in London). Between December 2015 and March 2018, the North West of England saw the highest number of Help to buy ISA bonuses paid.

Repeat buyers in the United States have consistently had a larger percentage of the purchase price to put down as a down payment when buying a home compared with first-time buyers. In 2023, repeat buyers had 19 percent of the purchase price on hand, whereas first-time buyers only had eight percent of theirs.