First-time buyer FOMO helps mortgages boom to highest since financial crisis

Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on Bank of England publication of Q2 mortgage data, showing first-time buyer FOMO helps mortgages boom to highest since financial crisis.

Main headlines:
  • The amount lent in mortgages between April and June hit its highest point since 2007 – £89 billion. This was more than twice the level seen a year earlier.
  • Most were for house purchases by people who planned to live in the property – at 66.4%.
  • Of this group, 24.7% were first time buyers, up 6.5 percentage points from a year earlier and 2.8 points higher than the start of the year.
  • The value of mortgages agreed for the coming months more than doubled from a year earlier, at £85.6 billion. This is still below the peak at the end of 2020.
Sarah Coles says:

“First-time buyer FOMO helped fuel the rush for mortgages ahead of the stamp duty holiday deadline, pushing them higher than any time since the financial crisis. The fact that these buyers have less to gain from the stamp duty holiday itself demonstrates that the property boom isn’t over yet.

“Overall, mortgages agreed for the coming months fell slightly, so we expect sales to back off from record highs. However, they remain significantly higher than a year earlier, so we don’t expect the market to fall silent.

“In fact, first-time buyer statistics reveal real strength in the market. These buyers made up a higher proportion of mortgage borrowers than at any other time since the onset of the pandemic. They had far less to gain from the stamp duty holiday than everyone else. They are already exempt from stamp duty on properties worth less than £300,000, and on properties worth £300,000-£500,000, they only pay 5% on the property value over £300,000. Given that the average first-time buyer property in March cost £214,452, most of them don’t have stamp duty to pay anyway.

“Instead, they’ve been driven by other forces in the market, which aren’t going anywhere in a hurry. Rock bottom mortgage rates, and the fact some people were able to save more money during lockdown, made the move add up for more prospective buyers. FOMO played its part, as rising house prices convinced buyers to take the plunge before prices rose out of reach. And it helped that the prices of typical first homes, especially flats, have risen less than those for houses, as current owners have joined the race for space.

“Government guarantees for higher loan-to-value mortgages are also easing the pain slightly. Although only 2% of mortgages were for more than 90% of the purchase price, this was up slightly from the start of the year 

“Further down the scale, things are getting easier: 39.6% of mortgages were for 75% or more of the purchase price, up 3.2 percentage points from a year earlier.”


Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay