First-time buyers (FTBs) bounced back over the course of 2024 following positive developments such as the falls in the Bank of England’s base rate.

This is according to analysis by Yorkshire Building Society, which suggested that FTBs have boosted their affordability potential as a result.

However, the society’s group economist, Max Shepherd, has also suggested the Government’s Budget changes to stamp duty rules could potentially trigger a “surge” in completions in Q1 2025 as FTBs and home movers rush to try to secure their homes before the stamp duty change increases the cost of doing so on 1 April.

Once the change comes into force, Shepherd warned it has the potential to put existing homeowners off selling, resulting in a “double-whammy” for FTBs by inflating house prices further out of their reach.

“While the trend is no doubt positive, the stamp duty change announced in October’s Budget and ongoing geopolitical headwinds represent further risks to keep an eye on,” Shepherd said.

“The reduction in the threshold at which Stamp Duty Land Tax is paid, to £300,000, means that anyone buying a £500,000 home would pay an extra £10,000, and £25,000 if their property is worth over £500,000. Previously, properties up to £425,000 in value were exempt.

“Although buyers in regions like the North are likely to be unaffected by the change, higher house prices in the South could see buyers there caught in this trap.”

Based on latest available figures to the end of October from UK Finance, Yorkshire Building Society has estimated that there will have been 330,000 FTB mortgage transactions during 2024 – a figure up 13.8% from the 290,000 in 2023 – which was the lowest number since 2013 (260,000).

The society suggested the 2023 slump was due to pressures from the cost of living crisis, higher interest rates and burgeoning house prices, all of which deterred prospective buyers from dipping their toes back into the market.

Shepherd added: “The base rate cuts during 2024 are one of the factors that have contributed to increased first-time buyer confidence, though caution is needed when it comes to any hopes they might see materially lower mortgage rates in 2025.

“The market is expecting three base rate cuts this year, which have been priced in by the market already, so I don’t think we’re likely to see average rates fall much below 4% and therefore anyone thinking of buying should probably base their planning around that.”

---