The average price paid for first-time buyer homes has increased by 7.1% in a year fuelled by cheaper mortgages and relaxed lending rules, a report has found.
Research from MPowered Mortgages, which looked at Official Land Registry Data, showed that first-time buyers who got onto the property ladder in March paid on average around £231,000.
This is £15,350 more than the average paid in the same time last year.
The report noted that from January to March, the average price paid for a first-time buyer home increased by £4,772, which is a 2.1% rise during the period.
MPowered Mortgages said first-time buyer house prices grew 2.5 times faster than those paid for by existing homemovers, where the increase was estimated at 0.8% over the period.
First-time buyers in the North of England saw the biggest house price increases during the period, followed by Yorkshire and the Humber and the North West.
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In the North East of England, the increase during the three-month period was estimated at 6.6%, equal to around £9,151.
For Yorkshire and the Humber, the house price increase for first-time buyers was estimated at 5.4%, coming to £183,827. For the North West, the rise was estimated at 4.09%, bringing the average house price to £189,315.
At the other end of the spectrum were London, Scotland and Wales, which contracted by 0.98% and 0.84% and grew by 0.24% respectively.
The report said house price inflation for first-time buyers has outpaced that for homemovers for several years. For instance, since 2020, the price of the average first home rose by 27.1%, while for homemovers, the increase was estimated at 25.2%.
MPowered Mortgages said a rise in stamp duty in April had led many first-time buyers to push through purchases, which could have boosted house price increases.
It also pointed to Bank of England data that suggested that nearly a third of new mortgage lending in the first quarter of the year was to first-time buyers, which is the highest share on record.
The firm said first home prices could “continue to accelerate even though the stamp duty stampede is over”.
‘First-time buyer boom’
Peter Stimson, director of mortgages at MPowered Mortgages, explained: “Since last August, the Bank of England has reduced its base rate by a full percentage point. While this has brought down mortgage interest rates for all customers, buyers have also seen their borrowing power surge thanks to a relaxation of lending criteria.
“When deciding how much to lend to someone, lenders must ‘stress test’ the customer’s ability to cope with an increase in interest rates during the first five years of their mortgage.”
He added: “The stress test benchmarks used by lenders have been significantly lowered in recent months, thanks to a combination of the falling base rate, reductions in standard variable rates and the adoption of a more flexible approach by the Financial Conduct Authority.
“As a result, buyers are routinely being offered loans up to 20% larger than they were a year ago. For first-time buyers, who typically borrow close to the maximum they can, the ability to borrow more, and pay more, for a home is pushing up prices sharply.
“Lower stress tests have replaced the stamp duty deadline as the fuel for a first-time buyer boom.”
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