Halifax: First-time buyer mortgage deposits fell 15% in 2023 - is now the time to buy?

First-time buyers struggled to get on the property ladder amid higher mortgage rates last year but there was some silver lining for those that managed to make a purchase as falling prices pushed typical deposits down.

Research by Halifax has revealed that the overall number of first-time buyers fell by 21% last year to 293,339.

Buyers were deterred by high mortgage rates and the cost of living crisis.

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But despite the drop, Halifax’s data shows those buying a property for the first time continued to make up the majority of all home loans last year at 53% as the wider market slowdown also hit existing homeowners looking to move.

It was the highest proportion, since 1995, of all home purchases with a mortgage. 

Many buyers also got on the property ladder by teaming up, Halifax said, with almost two thirds of mortgage completions in joint names last year.

“The overall fall in house prices we saw in 2023 will go some way to helping people get on the ladder for the first time – but these buyers are still dependent on a steady supply of properties in their price range, while they are faced with the continued pressure of saving for a deposit, when rent and living costs are high,” says Kim Kinnaird, director at Halifax Mortgages.

How much does it cost to get on the property ladder?

House prices dropped for much of last year.

The average price of a first-time buyer property last year was £288,136, Halifax said.

That is 5% lower than in 2022 but 86% higher than a decade ago.

But in many cases the slowdown was offset by higher mortgage rates, with average pricing above 6% in the first half of 2023.

First-time buyers who could afford the higher mortgage rates paid lower deposits overall compared with in 2022.

The average first-time buyer deposit fell 15% annually last year to £53,414.

First-time buyers in the East Midlands saw the largest deposit drop, at 16% annually last year, Halifax said.

London and the South East also had some of the largest deposit falls last year at 15% each.

Although at £108,848 and £59,075 respectively, the figures remain the largest by some way for new buyers to save towards a property. 

The average age of a buyer also increased by two years in 2023 to 32, while the average house price to earnings rate was 6.7 times.

“First-time buyers have been hit especially hard by rising mortgage rates,” says Tom Bill, head of UK residential research at Knight Frank.

“The sub-4% deals we increasingly hear about are typically for those with equity levels of 40% or more. The government is likely to offer first-time buyers more financial support ahead of the election this year given that housing is a key political battleground and based on the belief that homeowners are more likely to vote Conservative.”

Will house prices fall in 2024?

Predictions about the direction of house prices vary and much will depend on when interest rates are cut and mortgage pricing.

Halifax has predicted that prices could fall by between 2% and 4%.

Similarly, Zoopla has predicted that UK house prices will fall by 2% during 2024 based on mortgage rates dropping to 4.5% by the end of the year and remaining there into 2025.

However, some analysts have revised their forecasts based on hopes that interest rates will be cut faster than expected.

Knight Frank had previously predicted a 4% drop in prices but now believes they will actually rise by 3% this year.