Looking at the year ahead and what it might have in store

Early signs are positive for first-time buyer activity and the market at large, according to data we recently shared. However, headwinds such as the impending Stamp Duty change and ongoing economic and macro-economic volatility are certain to mean we must all stay alert – and brokers’ role in advising consumers what to do for best will remain as critical as ever.

Analysis released by Yorkshire Building Society (of which Accord is the intermediary-only lending arm) in January, suggested first-time buyers bounced back during 2024 – thanks to  factors like successive falls in Bank Base Rate boosting their affordability potential.

Based on latest available figures to the end of October from the UK Finance trade body[i], we predicted that there will have been 330,000 first-time buyer mortgage transactions during 2024 – up by 13.8% from the decade low of 290,000 in 2023, which was caused by cost-of-living pressures, high interest rates and burgeoning house prices.

While there are concerns inflation could rise again, rates are at least remaining reasonably stable and the Bank of England’s Base Rate cut in February was a positive signal of intent, with the potential for further decreases during the year.

Overall house purchase activity is faring well also against this backdrop, increasing by an estimated 10% in 2024, to 1.1 million transactions over the year compared to 2023’s one million. First-time buyers continued to drive this increase, making up 54%.

The reduction in the threshold for paying Stamp Duty, to £300,000, is less positive, of course, given anyone buying a £500,000 home from 1 April  will pay an extra £10,000, and £25,000 if their property is worth over £500,000. Previously, properties costing up to £425,000 were exempt. 

Buyers in places like parts of the North will be largely immune, but the higher cost of moving for those who are not so lucky could put homeowners off selling, potentially reducing supply and inflating prices further out of reach for those starting out.

Remaining vigilant

These things, coupled with geopolitical uncertainty surrounding developments like world conflicts and the inauguration of Donald Trump as US president, mean it’s vital brokers maintain a watchful eye in order to guide their clients.

Despite the February Base Rate drop from 4.75% to 4.50%, we would urge caution regarding expectations of mortgage rates in 2025, as the three base rate cuts widely predicted for the year have been largely priced in already. A salutary example of how fast things can still change, was the volatility surrounding rising gilt yields which sent market rates northwards again in January, albeit we have seen further downward movements from lenders this month. We still expect borrowing costs to continue edging gradually down, but we all need to be realistic about how much further they have to fall, and the historic post-credit crunch lows are most likely a thing of the past.

Reasons to be cheerful

Nevertheless, the increase in first-time buyer confidence is encouraging given their catalysing marketplace role, and shows they are finding ways to overcome unprecedented challenges around affordability and raising a deposit.

To help them maintain their positive momentum, we launched our £5k Deposit Mortgage last Spring, allowing borrowers to purchase a home worth up to £500,000 with a deposit of just £5,000. We have recently extended availability to flat purchases, so that more people who might otherwise give up hope of homeownership can experience its life-changing benefits.

And we have recently called for enhanced government support and a united industry approach to finding better solutions to help this vital group achieve their ambitions, in our  Home Improvements – building an integrated strategy for UK housing policy paper, launched at a Parliamentary event last autumn. 

A golden opportunity for brokers

One thing is for certain, all of this points to a golden opportunity for brokers to deepen their client relationships by using their expertise to reach out and guide their choices.

The year ahead looks equally promising and industry bodies IMLA and AMI are forecasting year-on-year lending market growth.

There will undoubtedly be further bumps along the road but we still expect the longer-term picture to be more stable, albeit it remains vital that financial advisers counsel borrowers to set realistic expectations and base their decisions on what is happening now – not where things might be in a few months’ time.

No matter what issues emerge, the markets have proved, time and time again, their capacity to reset and continue functioning positively, and that means there is plenty of scope for cautious optimism in 2025.

 
[i]  Based on UK Finance data to October 2024, with November and December 2024 volumes estimated by Yorkshire Building Society, in line with previous first-time buyer patterns. Actual data due to be published in February 2025 from UK Finance.

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