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The share of mortgage lending to UK first-time buyers hit a record high at the end of last year, as buying property became cheaper than renting and more landlords left the market.
People joining the property ladder accounted for 29.6 per cent of all mortgage lending in the final quarter of 2024, according to data published by the Bank of England on Tuesday.
It is up 1.9 percentage points from the same period in 2023 and the highest proportion since data collection began in 2007.
The share of lending for buy-to-let purposes was 8.2 per cent, up marginally from the record low of 7 per cent registered in the final three months of 2023.
The rest of the lending market is made up of people already on the property ladder moving house, and those remortgaging, the combined share of which has declined slowly over the past two decades.
Richard Donnell, executive director at property consultancy Houseful, said the figures reflected rents rising faster than house prices over the past two years as well as the drop in mortgage rates since 2023.
“Now buying is cheaper [than renting] across the UK, this is supporting first-time buyer demand,” he said. “More landlord sales also support this trend as they are typically selling what first-time buyers want.”
The property platform Zoopla on Monday said first-time buyer mortgage payments averaged £1,038 a month in February, 20 per cent lower than the average monthly rent of £1,248 across Great Britain, as house price growth has stalled and rents have powered ahead.
Average UK private rents jumped by 8.7 per cent in the 12 months to January 2025, according to official figures published last month, nearly double the 4.6 per cent rise in UK house prices in the year to December 2024.
Simon Gammon, managing partner at mortgage broker Knight Frank Finance, said lenders had been offering longer contracts or easing affordability tests to enable more prospective buyers to get on the property ladder.
“That’s happened as rates have eased and affordability has improved . . . [and] surging rents have given buyers a real sense of urgency,” he said.
“Double-digit increases in rents have made home ownership a much more attractive option” despite some volatility in recent years in the mortgage market, he added.
The BoE figures also showed that the proportion of mortgages in arrears plateaued at the end of last year, after rising since 2022 in response to higher interest rates.
The share of mortgages in arrears stood at 1.3 per cent in the final quarter of 2024, unchanged from the previous three months.
Analysts said the near-record low share of lending for buy-to-let purposes pointed to the hit to the market from higher borrowing costs and taxes and more regulation.
Gammon said tighter rules around Energy Performance Certificates, which rank a property’s energy efficiency, as well as “mortgage rate volatility and uncertainty over the government’s policy agenda have all coincided to squeeze the buy-to-let market”.
“For many [landlords], the profit margins offered don’t adequately align with the risks,” he added.
