Almost half of all home buyers in London earlier this year were first-time buyers, according to figures from major estate agents, as cheaper mortgages slowed the exodus from the capital.
A Hamptons analysis of data from Countrywide Real Estate agents found that 48% of buyers in the city between January and June were first-time homebuyers.
That’s the highest since at least records began in 2010, analysts say, and up from 41% for 2023 and 28% a decade ago.
Hamptons said the impact of falling mortgage rates on buyers’ purchasing power had been “significant”, with the average spend by first-time home buyers in London at £443,550, an increase of £39,360 on last year.
Hamptons’ head of research, Aneisha Beveridge, said: “Falling mortgage rates are starting to turn the tide on the rise in first-home buyers leaving London. Lower mortgage payments are bringing the cost of buying below the cost of renting, providing relief to people looking for their first home in London.”
“First-time buyers with better cash are turning their attention to London again, choosing Clapham over Crawley and Wembley over Wycombe.”
Countrywide owns brands including John D Wood & Co, which operates in the luxury housing market, as well as mainstream brands such as Bairstow Eves. Its figures do not include data for rivals such as Foxtons and Savills.
Mortgage rates fell earlier this year as hopes of interest rate cuts grew.
There was a flurry of interest rate cuts from some of the major banks and building societies last week and brokers said they expected further cuts to come.
Nicholas Mendes of mortgage broker John Charcol said previously the most favourable mortgages were for people with at least 40 per cent down payment, but rates were now being reduced for those borrowing up to 75 per cent of the property’s value.
“Despite the expected rise in inflation, we expect mortgage rates to continue to fall over the coming months. The market is pricing in further cuts in bank rates and lenders have room to continue lowering rates. We could see five-year fixed rates hovering around 3.5% by the end of the year,” he said.
“For those with higher LTV (loan-to-value) ratios, the rate cuts may be more gradual, but you could end up with rates of 4.2% to 4.5% by the end of the year.”
Thanks to temporary relief introduced in England and Northern Ireland two years ago by then finance minister Kwasi Kwateng, first-time buyers will only pay stamp duty on properties over £425,000.
The Conservatives have promised to make the threshold permanent if they win the election, but Labour has previously said it would allow a return to the £300,000 limit for first-time home buyers from 31 March 2025.
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Mr Beveridge said any cuts to the tax-free stamp duty bands were likely to have a bigger impact on London and the south-east of England than other regions because of house prices.
He said 43% of first-time home buyers in London spent more than £425,000 on their home purchase this year, compared with an average of 9% across England.
“With that in mind, some first-time buyers may be tempted to save by buying a home in London before the deadline, but most first-home purchases at the moment are based on affordability, limiting the likelihood of a major rush,” Beveridge added.
Hamptons’ analysis found that the outflow of Londoners to other parts of the country has slowed since the peak of the pandemic.
Londoners bought 33,130 homes in other parts of the country in the first half of this year, roughly the same figure as for the same period in 2023.
Based on current trends, Londoners will buy around 76,000 homes outside the capital this year – up from the 68,050 they left last year, but down from a 2022 peak of 100,910.
