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First-time buyers forced to band together to get on housing ladder

The Telegraph logo The Telegraph 25/01/2023 Alexa Phillips

First-time buyers are being forced to club together to get on the housing ladder, as the number of joint loans taken out hit the highest level since 2014.

Nearly two thirds (63pc) of first-time buyers took out mortgages with at least one other person last year, according to lender Halifax.

The proportion has been steadily increasing since 2014, when Halifax’s records began. Then, less than half (43pc) of first-time buyers took out joint loans.

The number of first-time buyers getting on the housing ladder fell by 11pc between 2021 and 2022 as they were squeezed by higher mortgage rates and hit by the end of the generous stamp duty holiday. However, they made up 52pc of all mortgage borrowers, which is the highest level in the last decade.

Between July 2020 and June 2021, no stamp duty was paid on any residential property worth up to £500,000. When this ended, the tax threshold for first-time buyers fell to £300,000, but rose again last September to £500,000.

Mortgage rates more than doubled last year, with the average two-year fix rising from 2.38pc in January 2022 to 5.89pc at the end of December. First-time buyers were particularly affected as they usually have larger loans with smaller deposits, which attract higher rates.

To get a mortgage, first-time buyers are increasingly relying on a second borrower to prove they can afford the repayments. Before approving a mortgage, lenders have to check that borrowers can afford to pay their standard variable rate plus one percentage point. With standard variable rates rising because of higher interest rates, first-time buyers now need bigger incomes or deposits to pass affordability stress tests.

The average first-time buyer will pay more than £300,000 for their home and put down £62,000 – or 21pc – for a deposit. The average cost of a first home rose by 13pc from the previous year.

Kim Kinnaird, mortgages director at Halifax, said: “The length of time needed, and cost of, raising a deposit are likely having an impact on the profile of the average first-time buyer over time.” The average first-time buyer is now 32 years old, which is two years older than a decade ago.

The number of first-time buyers fell most sharply in the South East, South West, Wales and Northern Ireland last year, with a slump of 12pc recorded in all of these areas. The smallest drop (7pc) was in the East Midlands. 

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