More buyers teaming up to get first home

More than half (57%) of first-time buyers clubbed together with someone else to buy a home last year, with 43% purchasing their property on their own, data from TSB has revealed.

In 2022, 54% of first-time buyers with TSB took out a joint mortgage, with 46% going it alone.

The bank reported there has also been an increase in the average mortgage term for first-time buyers, from 30 years in 2021 to 32 years in 2023.

Stretching out a mortgage term for longer is one way to make elevated rates more affordable on a monthly basis, although buyers could end up paying more in interest.

Overall, first-time buyers accounted for just over a third (35%) of mortgage completions in 2023, TSB said, with the average age of someone getting on the property ladder falling to 31, from 32 in 2022.

Video banking accounted for nearly two-thirds (63%) of appointments in which customers purchased a mortgage directly from TSB in 2023.

Roland McCormack, TSB mortgage distribution director, said: “Across the UK, the drive to get on to the property ladder is bigger than ever, with first-time buyers taking out extended repayment terms to acquire a home.”

David Postings, chief executive of UK Finance, told an industry gathering that a typical first-time buyer in 2023 would have needed to stretch their loan out for half a century to achieve the same level of affordability that they would have had across a 30-year mortgage in 2022.

Mr Postings said: “We looked at a typical first-time buyer in 2022, which was a relatively stable year, and the average mortgage term was 30 years.

“But we then rolled forward the average change in house prices, mortgage rates and incomes to the middle of 2023. For that buyer to achieve the same affordability, as measured by their mortgage payments compared to income, they would have needed to borrow over a 50-year term.

“As rates rose through 2023, this calculation increased further.

“A 50-year term sits outside any lender’s underwriting criteria and we’re not suggesting we want mortgages of this length. This does, however, demonstrate why we have seen such a significant increase in longer-term borrowing.”

Paul Heywood, chief data and analytics officer at Equifax, said: “For those nearing retirement age, it is increasingly difficult to extend loan terms further into the future, meaning they are faced with more expensive monthly repayments.

“Meanwhile, many homeowners will have locked themselves into a new fixed rate that could see them making higher repayments for longer.

“The starting point for lenders and creditors must be to understand the affordability of their customers.”

MARKET: The average term of a first-time buyer’s mortgage has increased to 32 years.