Almost half of house hunters in London at the beginning of this year were first-time buyers as cheaper mortgage deals slowed the exodus from the capital, figures from a leading estate agent show.
First-time buyers made up 48% of purchasers in the city between January and June, according to analysis by Hamptons of data from Countrywide estate agents.
This was the highest since at least 2010 when its records began, and up from 41% in 2023 and 28% a decade ago, the analysts said.
Hamptons said the impact of lower mortgage rates on the spending power of buyers had been “significant”, with the average first-time purchaser in London spending £443,550, which was £39,360 more than last year.
Aneisha Beveridge, the head of research at Hamptons, said: ‘“Falling mortgage rates are starting to turn the tide on the rising number of first-time buyers leaving London. Lower mortgage payments have pulled the cost of buying back below renting, bringing relief to those looking for their first home in the capital.
“First-time buyers with deeper pockets are looking again at London, choosing Clapham over Crawley and Wembley over Wycombe.”
Countrywide owns brands including John D Wood & Co, which operates at the prime end of the market, and mainstream names such as Bairstow Eves. Its figures do not include data from rivals such as Foxtons and Savills.
Mortgage rates were falling in the early months of this year, as expectations of an interest rate cut grew.
Last week, there was a flurry of cuts by some of the biggest banks and buildings societies, and brokers said they expected more to come.
Nicholas Mendes from the mortgage broker John Charcol said that while the best deals had been on mortgages for those with a deposit of at least 40%, there were now cuts in rates for those borrowing up to 75% of a property’s value.
“Mortgage rates are expected to continue falling in the coming months, despite the anticipated rise in inflation. Markets are pricing in further reductions in the Bank Rate, and lenders have room to keep lowering rates. We could potentially see a five-year fixed rate around 3.5% by the end of the year,” he said.
“For higher loan to values, rate reductions may happen more gradually, but we might see rates between 4.2% and 4.5% by year-end.”
First-time buyers only pay stamp duty on properties costing more than £425,000 thanks to a temporary relief for England and Northern Ireland introduced two years ago by the then chancellor, Kwasi Kwarteng.
The Conservatives had pledged to make the threshold permanent if they won the election, but Labour has previously said it would allow it to revert to a £300,000 limit for first-time buyers from 31 March 2025.
Beveridge said the lowering of the nil-rate stamp duty band was likely to have more of an impact in London and south-east England than elsewhere because of the price of homes.
She said 43% of first-time buyers in the capital spent more than £425,000 on their home this year, compared with an average of 9% across England.
“With that in mind, we might see some first-time buyers try to make savings by purchasing homes in London before the deadline. However, most first home purchases at the moment are affordability driven, limiting the likelihood of a significant rush,” Beveridge added.
Hamptons’ analysis showed the exodus of Londoners to the rest of the country had slowed since the height of the pandemic.
In the first half of this year, people living in London purchased 33,130 in other parts of the country, a similar figures to the same period of 2023.
Based on current trends, about 76,000 homes will be bought outside the capital by Londoners this year, up on the 68,050 who moved out last year but down from a peak of 100,910 in 2022.
