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Why First-Time Buyers Still Face Record Prices

The housing market over the past three years has been in a near-constant state of flux and has only just started to slow down in the first half of 2023.

After two years of constant record highs, average house prices have remained almost stagnant, with the belief that overall prices are set to fall at some point in the next few months.

Despite the slowing down of the market, with Hackney estate agents reporting similar prices to the previous year, one segment of the market that is still setting all-time price records is first-time-buyer properties.

The average price people jumping onto the property ladder will be expected to pay has increased to nearly £225,000, despite the Bank of England’s 11th Bank Rate increase in a row slowing the rest of the market down.

Part of the reason for this is that the vast majority of first-time buyers rent, and with the price of rent increasing alongside other cost-of-living pressures, even the increased mortgage rates and 

overall prices are not enough of a deterrent for buyers able to meet mortgage requirements.

Another reason is that average mortgage rates have started to fall after the financial shock of late September 2023, with an average mortgage rate of 4.5 per cent.

This is still nearly double the average rate in 2022 but is enough of a downward trend for some buyers to make the decision and join the market.

There are also some innovative mortgage products out there such as 100 per cent mortgages and mortgage rates set at a particularly long-term rate.

What will happen next will largely depend on the overall economy now that the housing market itself has largely settled with few surprises on the horizon. 

If cost of living pressures remain strong it will have a knock-on effect on house prices, and if the economy experiences negative growth, so will the housing market.