Where have all the first time buyers gone? The latest edition of the moneysupermarket.com ‘Mortgage Map’ reveals first-time buyers are disappearing at an alarming rate...

Since March this year, the percentage of people classed as a “first time buyer” has dropped by 20 per cent*, suggesting that rising house prices, rising interest rates and the dwindling pool of properties available to first time buyers - most likely due to the prevalence of buy to let landlords - are decimating the first time buyer market.  Furthermore, rising immigration may also be a factor in the rapidly diminishing proportion of First Time Buyers.

The research – a definitive snapshot of the UK’s mortgage landscape – also shows that, amid worries over the likely direction of base rate and an influx of lenders upping their rates, homeowners are increasingly turning to fixed rate deals of between one and five years in order to provide peace of mind for their monthly mortgage payments. 48 per cent of borrowers are on a fixed rate mortgage of between one and five years, compared to 39 per cent in March this year.

Lifeblood of the market

Louise Cuming, head of mortgages at moneysupermarket.com, said: “It looks like the attrition of first time buyers as they either move out of owner occupation or onto second time purchases is occurring at a much faster rate than new first time buyers coming into the market. Where are they going?

“The rate of decline is surprising and the five interest rate rises in the last 14 months means it is now more expensive for the first time buyers to get onto the housing ladder. First-time buyers are the lifeblood of the housing market and provide essential liquidity, so the fact this segment is getting smaller is worrying for the economy as a whole.

"The past month has been fraught with uncertainty and lenders have begun acting independently of the Bank of England in terms of rate pricing. It's not surprising some potential first-time buyers are getting cold feet and steering clear of home ownership, and the latest industry figures from the CML seem to be painting a similar picture albeit only measuring homeowners, with the percentage of first-time buyers falling 6 per cent against the total borrowing population for the first half of this year compared to the same period last year.”

The findings are the latest in a series from the moneysupermarket.com ‘Mortgage Map’, which provides regular insight into trends and patterns within the mortgage arena. Key findings from this report include:

Fixed rate mortgages

Over half of all homeowners are currently on a fixed-rate product (56 per cent), with over a quarter (27 per cent) opting for between a three and five year fix.

Most homeowners in London (27 per cent) are on a one to two year fix perhaps reflecting the need for security, but without long-term commitment, in what has always been a turbulent area for house price fluctuations. This is also the most popular choice for 25 to 34 year olds with 28 per cent choosing a one to two year fix against the GB average of 21 per cent.

Louise said: “It’s not a huge surprise to see most people in London opting for to fix – not only are house prices in the capital over 60** per cent higher than the national average, they’re also partial to the biggest fluctuations and even a quarter per cent rise in base rate can result in hefty monthly increases in mortgage repayments which many just cannot stomach.”

Standard Variable Rates (SVR)

The research shows that 19 per cent of homeowners are on their lender’s SVR, showing no change from March this year. Those in Wales and the West are the biggest culprits for wasting money, with a staggering 33 per cent of homeowners languishing on SVR.

Homeowners in Yorkshire are also culpable, with more than one in four sticking with their lender’s uncompetitive offering (28 per cent). Those in the South and East Anglia are to be congratulated for being canny money-savers – just 15 per cent of homeowners haven’t shopped around for a better deal than their lender’s SVR.

Louise said: “We need to ensure the messages about shopping around and the perils of staying on a mortgage lender’s SVR are getting through - lethargy is expensive as these deals can be as much as two or three per cent above the best deals on the market. However, this could be the first indication that an increasing number of borrowers do not have the luxury of shopping around and are ‘held to ransom’ on SVR as lenders tighten remortgage criteria. It will be very interesting to see the results of our next survey.”