Home Buying First-Time Buyers Losing Out As Housing Market Enjoys Record Highs

First-Time Buyers Losing Out As Housing Market Enjoys Record Highs


The year 2020 will go down in history, remembered for generations to come as a year unlike any other in living memory. Its fallout will continue for years to come. 

The property industry, and especially the housing market, found itself in the middle of a storm, suddenly thrown into the spotlight by a government desperate to find a way of keeping the UK economy strong or perhaps, as some believe, creating the appearance of strength. Either way, the result was exceptional with record highs and lows.

In May 2020, the UK saw record low numbers of home purchase approvals. According to the Bank of England, just 9,400 approvals were recorded for the entire month as the country struggled to understand the implications of the ‘new normal’ we found ourselves in: when fear of the unknown and existential crisis come in abundance, moving house is no longer a priority. 

But that state of paralysis didn’t last long. We soon found our feet and discovered how to navigate the world in its new state. Combine this with the government’s introduction of the SDLT holiday and the housing market went from the slowest month on record to a year of extraordinary boom. 

By the end of the year, 2020 had seen the highest number of house purchase approvals since 2007. The Bank of England reports that 818,500 approvals were granted in the 12 month period. When we consider that one of those months was the slowest on record, we get a good idea of just how busy the rest of the year must have been.

Mortgage and Remortgage

Despite some of the highest approval numbers on record, when it came to mortgage approvals and remortgage approvals, 2020 failed to match the figures from 2019. 

In 2020, there were 451,400 remortgage approvals, down from 587,600 in 2019. Total borrowing in 2020 hit £43.3bn, markedly down from 2019’s number of £48.1bn.

When we have home sales hitting all-time highs while mortgage approvals remain static or fall, it can indicate that a lot of people are buying in cash rather than needing a mortgage. While this sounds strange, we can look at the apparent trend in people selling their homes in the big cities to live among the greener pastures of the countryside. In such cases, the value of the city home often trumps the value of the country home, so a mortgage is not necessary. 

Falling lending amounts also indicates that this is a difficult time for first-time buyers. It was reported in January that first-time buyers now need an average of £10,000 more than they used to for a mortgage deposit. 

Because house prices have risen so sharply in recent months, and have done so very much out of line with average salaries, fewer people, certainly young people, can afford to get on the market.

If true, this would suggest that the UK housing market is now a playground for the country’s most wealthy people and that the current boom is not being shared among buyers with less disposable income. Should this disparity continue, we can expect so-called Generation Rent to get bigger and bigger in the post-Covid years.

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