The average UK house price is now just £1,800 off the peak recorded in June 2022 after it increased by 0.4% in February, marking the fifth monthly rise in a row, according to Halifax.

Property prices grew by 1.7% on an annual basis, compared with 2.3% the previous month, the building society said.

The average UK house price was £291,699 in February, about £1,000 more than the previous month.

Kim Kinnaird, director, Halifax Mortgages, said the figures “continue to suggest a relatively

The average UK house price is now just £1,800 off the peak recorded in June 2022 after it increased by 0.4% in February, marking the fifth monthly rise in a row, according to Halifax.

Property prices grew by 1.7% on an annual basis, compared with 2.3% the previous month, the building society said.

The average UK house price was £291,699 in February, about £1,000 more than the previous month.

Kim Kinnaird, director, Halifax Mortgages, said the figures “continue to suggest a relatively stable start to 2024 and align with other promising signs of increased housing activity, such as mortgage approvals.

“In fact, the average price tag of a home is now only about £1,800 off the peak seen in June 2022.

“Although lower mortgage rates, alongside expectations of Bank of England interest rate cuts this year, should help buyer confidence in the short term, the downward trend on rates is showing signs of fading.”

Kinnaird said that, even with growing wages and inflation falling back, raising a deposit and affording a sizeable mortgage remains challenging, so a slowdown in the housing market “remains a possibility” this year.

London has the highest average house price, £536,996 – up 1.5% on a year earlier last month – while the north-east was the region with the lowest average price, at £171,294, up 4.2%. The south-east and eastern England were the only areas where prices fell, down by 0.6% and 0.8%, respectively.

In Wednesday’s budget, the chancellor, Jeremy Hunt, unveiled some property tax measures, including a cut in the higher rate of capital gains tax on residential properties from 28% to 24% from April 2024.

Budget documents said the moves would encourage landlords and second homeowners to sell their properties, making more available for a variety of buyers – including those hoping to get on the housing ladder.

Nicky Stevenson, managing director at estate agent group Fine & Country, said: “It will be interesting to see whether the chancellor’s capital gains tax cut announcement in the budget encourages teetering landlords to sell their properties.

“A rush of new listings would inject more energy into the housing market and may reignite demand from first-time buyers who have been struggling to afford a home in this high interest rate environment.”

Amy Reynolds, head of sales at London-based estate agent Antony Roberts, said: “The market continues to pick up momentum after a relatively quiet 2023, with a flow of committed buyers and a strong pipeline of serious applicants, which bodes well for a busy spring market.”

Sam Mitchell, chief executive of Purplebricks, said: “The housing market has been on the path to recovery in recent months, helped along by consecutive holds on interest rates from the Bank of England and banks actively competing on mortgage rates, but this recovery remains fragile.”

The housing market is expected to stage a recovery in 2024 after average UK house prices fell by only £4,000 last year, according to official figures.

The price of the average home decreased by 1.4% in the 12 months to December 2023, an improvement on an annual fall of 2.3% recorded in November, the Office for National Statistics said.

The figures suggest that a slowdown in the housing sector in 2023 triggered by rising mortgage costs may be over, and a downward trend in house prices has bottomed

The housing market is expected to stage a recovery in 2024 after average UK house prices fell by only £4,000 last year, according to official figures.

The price of the average home decreased by 1.4% in the 12 months to December 2023, an improvement on an annual fall of 2.3% recorded in November, the Office for National Statistics said.

The figures suggest that a slowdown in the housing sector in 2023 triggered by rising mortgage costs may be over, and a downward trend in house prices has bottomed out.

After gains of more than 20% since 2020 that added more than £60,000 to the average UK house price, the latest figures show an annual drop of £4,000 to £285,000 in December. Prices hit a peak of £291,100 in the autumn of 2022.

Pent-up demand from cash buyers and first-time buyers who can access much cheaper mortgages than they could in 2023 is expected to push up prices back towards their peak this year, according to many economists.

The Bank of England is forecast to cut interest rates this year from 5.25% to 4.5%, prompting lenders to cut their latest two- and five-year fixed-rate mortgage offers.

Figures from the Halifax and Nationwide have shown prices bouncing back since the start of the year as mortgage loan costs tumble.

Gabriella Dickens, a UK economist at Pantheon Macroeconomics, said: “We expect the official measure to follow the Nationwide measure and start to rebound, as the fall in mortgage rates and recovery in real incomes boosts affordability.”

England had the highest average prices of all the UK nations and it experienced the biggest fall last year, down 2.1% to £302,000. Property values in Wales fell by 2.5%.

Scotland had the lowest average price and a rise in prices of 3.3% to £190,000, closing the gap in prices across the UK.

The north-west of England had the highest annual percentage change in 2023 – up 1.2% – while the lowest was in London, at -4.8%.

While house prices dipped in 2023, private rents continued to soar. In the two years before March 2020, when the coronavirus pandemic forced the government to lockdown the economy, rental inflation averaged 1.5%. Since then, rental costs have jumped year on year before levelling off at 6% over the last four months of 2023.

“Private rental prices paid by tenants in the UK rose by 6.2% in the 12 months to January 2024, unchanged for the second consecutive month,” the ONS said.

“Within England, London had the highest annual percentage change in private rental prices in the 12 months to January 2024, at 6.9%, while the north-east saw the lowest, at 4.7%.”

A new lender is offering Dutch-style longer-term fixed mortgages where the interest rate comes down as the home loan is paid off.

April Mortgages is currently only open to people who are remortgaging but plans to offer loans for house purchases by early April.

The firm is authorised and regulated by the UK’s Financial Conduct Authority and is part of a Dutch company called DMFCO, which has made more than 100,000 loans in the Netherlands via its mortgage brand, Munt.

A new lender is offering Dutch-style longer-term fixed mortgages where the interest rate comes down as the home loan is paid off.

April Mortgages is currently only open to people who are remortgaging but plans to offer loans for house purchases by early April.

The firm is authorised and regulated by the UK’s Financial Conduct Authority and is part of a Dutch company called DMFCO, which has made more than 100,000 loans in the Netherlands via its mortgage brand, Munt.

Its first fixed-rate deals in the UK last for five, seven, 10, 12 and 15 years, at rates starting at 4.99%.

While fixed-rate mortgages lasting more than five years have had a lukewarm response from UK homebuyers, in other countries longer-term deals are commonplace.

The most eye-catching feature of the loans is that the firm will lower the rate on the mortgage as the borrower pays it off and reduces their loan-to-value (LTV).

“Over time you will reduce the size of your loan, and this means our risk reduces,” the firm says. “So we think it’s only fair that we automatically reduce your interest rate as you pay off your mortgage and the value of your loan drops in comparison to the value of your property at the time you bought it.”

For example, if someone buys a property for £200,000 and borrows £150,000, their LTV is 75%. If they reduce their mortgage debt to £140,000, their new LTV would be 70%. Assuming that at that point April Mortgages has a cheaper rate available at 70% LTV than at 75% LTV, it will automatically switch them on to the lower rate – they do not have to do anything.

“It’s a fixed rate where the rate actually falls,” says the firm, which believes it is the only lender in the UK offering this feature.

Another notable feature of its deals is that the company does not impose early repayment charges if borrowers sell their home during the product term or make overpayments using their own money.

The mortgages are only available through brokers.

The launch comes months after a new UK mortgage lender called Perenna announced home loans that allow people to fix their monthly payments for up to 40 years, and potentially borrow up to six times their income.

Nicholas Mendes​, a mortgage technical manager at the broker John Charcol, said: “Both lenders offer long-term fixed rates which will allow prospective buyers and mortgage holders peace of mind but also higher income multiples. Not only are the rates competitive, they also don’t have early repayment charges.”

We’re keen to hear from homeowners in the UK who would like to downsize but have not felt able to do so.

Whether you’ve been feeling unable to move to a smaller home because of financial concerns, practical or emotional reasons, or any other reason, we’d like to hear from you.

We’re keen to hear from homeowners in the UK who would like to downsize but have not felt able to do so.

Whether you’ve been feeling unable to move to a smaller home because of financial concerns, practical or emotional reasons, or any other reason, we’d like to hear from you.

Homeowners with mental health problems are more likely to have cut back on food and energy to keep on top of their mortgage payments, a charityestablished by the consumer finance champion Martin Lewis has warned.

The Money and Mental Health Policy Institute said its research indicated that as many as 1.3 million people in the UK with mental health problems were spending less on essentials – which also included medicine – in order to afford their mortgage costs, which have in many cases increased

Homeowners with mental health problems are more likely to have cut back on food and energy to keep on top of their mortgage payments, a charityestablished by the consumer finance champion Martin Lewis has warned.

The Money and Mental Health Policy Institute said its research indicated that as many as 1.3 million people in the UK with mental health problems were spending less on essentials – which also included medicine – in order to afford their mortgage costs, which have in many cases increased sharply after a string of interest rate rises.

The charity found that while many mortgage holders had been forced to cut spending in other areas to keep up with higher repayments, the impact had been particularly acute for the three in 10 mortgage borrowers with mental health problems.

Several hundred thousand people saw their monthly outlay rise last year when their existing mortgage deal expired and they were forced to take out a more costly loan. It is estimated that about 1.6m cheap fixed-rate deals are due to expire in 2024, and while the current home loans rate war will help to soften the blow, these borrowers still typically face a big jump in their payments.

Those with mental health problems were “significantly more likely” than those without such conditions to have taken drastic action in order to cover their mortgage costs, and were also at greater risk of falling into arrears, the charity found.

A YouGov poll of 2,150 UK adults that formed part of the research found that 30% of mortgage holders with mental health problems had cut back on essential spending to stay in the black with their mortgage, compared with 21% of people without such conditions.

They were also about twice as likely (29% compared with 15%) to have raided their savings to keep up with their home loan payments, and to have cut spending on essential maintenance and repairs to their home (27% compared with 14%).

The Money and Mental Health Policy Institute is calling on banks and building societies to identify and contact customers struggling with payments, and make support measures “more inclusive and accessible” for people with mental health problems.

It added: “With 1.6m more households rolling off fixed-rate deals and facing significant payment hikes in 2024, urgent action from lenders is needed to help more homeowners avoid distress and financial harm.”

The charity’s call coincided with a separate survey from the charity Shelter and the high street bank HSBC showing that 40% of people who pay a mortgage or rent in England – equivalent to 12 million adults – were worried their housing pressures would get worse this year.

More than half (56%) of those polled reported being kept awake at night in the last year, while 70% said they felt anxious, and about half (49%) said their housing situation had left them feeling hopeless.

A spokesperson for the banking body UK Finance said: “The financial services industry is committed to supporting all customers, and lenders work hard to make it easier for customers to disclose their needs so that they can give them the support they need.

“Lenders are ready to support anyone who is struggling with their mortgage payments, and UK Finance’s Reach Out campaign was launched to raise awareness of the help available. We would encourage anyone worried about their finances to get in contact with their lender to discuss the support available.”

Nationwide has intensified the mortgage price war by announcing big cuts to some rates that propel it to the top of the best-buy tables.

Britain’s biggest building society has “blown the doors off” with reductions of up to 0.81 percentage points, said brokers. Its new mortgage rates now start at 3.84% – the lender’s lowest rate for eight months.

Banks and building societies have for some weeks been engaged in a rate war in which they have cut the costs of new fixed-rate deals. Barclays

Nationwide has intensified the mortgage price war by announcing big cuts to some rates that propel it to the top of the best-buy tables.

Britain’s biggest building society has “blown the doors off” with reductions of up to 0.81 percentage points, said brokers. Its new mortgage rates now start at 3.84% – the lender’s lowest rate for eight months.

Banks and building societies have for some weeks been engaged in a rate war in which they have cut the costs of new fixed-rate deals. Barclays shaved up to 0.6 percentage points off its fixed rates with effect from Monday.

However, recent increases in money market swap rates – which largely determine the pricing of new fixed deals – have prompted a few lenders to increase their rates over the past week or so. Santander has announced small increases to the pricing of some of its fixed-rate deals that take effect on 24 January.

Nationwide’s new rates, which go on sale on the same date, include five-year fixed-rate home loans aimed at home movers and first-time buyers starting at 3.85%.

It said it was also cutting some “switcher” rates – aimed at Nationwide mortgage customers coming to the end of their existing deal and looking for a new one – by up to 0.81 percentage points, with rates starting from 3.84%.

Katy Eatenton, a mortgage and protection specialist at Lifetime Wealth Management, said the Nationwide cuts “will put them in pole position on the lending starting grid”.

She added: “It also squashes any doubt in the market after Santander announced increases today.”

Justin Moy, the managing director at broker EHF Mortgages, said Nationwide had “jumped straight to the top of [the] best-buy tables for many deals”, while Charles Breen, the founder of Montgomery Financial, said the society had “timed this one to perfection, just as other high street lenders are increasing their rates. They have blown the doors off and will now be in prime position to steal massive market share from their competitors.”

Nationwide said the latest changes meant it was now offering sub-4% rates for the first time in eight months.

Many homeowners who had to take out new mortgages last year saw their monthly repayments double, or worse, as they came off cheap deals taken out several years earlier.

It is estimated that about 1.6m cheap fixed-rate deals are due to expire in 2024, with these borrowers still typically facing a big jump in interest payments when they switch to a new product.

Ministers could be at risk of fuelling a fresh house-price bubble, according to industry experts who have warned about a potential “99% mortgages” scheme for first-time buyers that would appeal to young voters before the next election.

The scheme, which is reportedly being considered by the prime minister, Rishi Sunak, and the chancellor, Jeremy Hunt, before the spring budget on 6 March, would only require borrowers to put down a 1% deposit towards their first home.

If approved, the programme

Ministers could be at risk of fuelling a fresh house-price bubble, according to industry experts who have warned about a potential “99% mortgages” scheme for first-time buyers that would appeal to young voters before the next election.

The scheme, which is reportedly being considered by the prime minister, Rishi Sunak, and the chancellor, Jeremy Hunt, before the spring budget on 6 March, would only require borrowers to put down a 1% deposit towards their first home.

If approved, the programme would go even further than the 5% deposit previously required as part of the Help to Buy scheme – which expired at the end of March 2023 – under which the government provided assistance at a time when 95% mortgages were scarce. The government recently extended a separate mortgage guarantee scheme, which incentivises lenders to offer larger mortgages by promising to cover a portion of their losses if customers default and a home is repossessed.

Housing is expected to become one of the major battlegrounds before the election, which is likely take place this autumn. And while the programme would undoubtedly help some of generation rent get to on the housing ladder, industry experts warned that ministers needed to consider the consequences of pushing more buyers into the market.

“This radical approach to dismantling the towering barriers to home ownership will sound fantastic to those struggling to find a larger deposit,” said Peter Stamford, the founder and lead adviser for Moor Mortgages, commenting on the speculation about 99% loan-to-value (LTV) mortgages, first reported in the Independent.

He added that there was “a risk it could once again cause the property market to overheat, driving prices up further. It’s a high-stakes gamble and could potentially fuel yet another house price bubble.”

Other brokers warned that such a scheme could expose borrowers to unmanageable debts similar to those still carried by some buyers who were offered 100%-plus mortgages, worth more than the price of their home, during the 2008 financial crash.

“We still see so many people impacted and stuck on the old Northern Rock mortgages,” said Richard Jennings, the founder and managing director of Richard Jennings Mortgage Services, referring to the lender that was fully nationalised during the 2008 crisis.

“This scheme would undoubtedly offer protection to lenders, but what plans does it have in place to protect the borrower? A longer-term, sustainable and affordable model needs to be found to ensure future generations can continue to get on the housing ladder,” Jennings added.

The latest speculation about what can be done to help those struggling to get on the ladder comes after the number of first-time buyers tumbled to its lowest level in a decade last year, with borrowers deterred by high interest rates and years of house price rises that have made the jump to home ownership much less affordable.

The average earner with a 20% deposit for their first home is now saddled with a monthly mortgage payment equivalent to 38% of their take-home pay – well above the long-term average of 30%, according to recent Nationwide data.

The government did not deny that a 99% mortgage programme was being discussed and said all schemes remained under review.

A Treasury spokesperson said the extension of the mortgage guarantee scheme to 2025 had allowed more than 39,000 households to buy a home and provided “additional support for first-time buyers”.

Cash in on the mortgage price war

There was some much-needed good news this week for homebuyers and those whose current mortgage deal is about to come to an end. A mortgage “price war” has intensified, with HSBC, Halifax and TSB among the many lenders cutting the cost of their new fixed-rate deals during the last few days.

HSBC said on Thursday that a number of its new deal rates were now below 4% for the first time since last April.

Cash in on the mortgage price war

There was some much-needed good news this week for homebuyers and those whose current mortgage deal is about to come to an end. A mortgage “price war” has intensified, with HSBC, Halifax and TSB among the many lenders cutting the cost of their new fixed-rate deals during the last few days.

HSBC said on Thursday that a number of its new deal rates were now below 4% for the first time since last April.

But while the home loans market might be hotting up, investment platform Bestinvest says this won’t fully ease the pain for the roughly 1.6 million existing borrowers with cheap fixed-rate deals expiring this year, who still typically face a big jump in interest payments when they switch onto a new product.

If your deal is not ending for perhaps nine or 12 months, your options are more limited, but for many others there are things you can do now.

Remortgage offers are typically valid for up to six months, so if your deal is ending in, say, five months, don’t wait – you can reserve a deal now and keep it under review. If the cost of new deals continues to come down, you are not committed to that mortgage offer and can hop on to a lower rate. However, it means you at least have a deal in your hand.

Meanwhile, Chris Sykes at broker Private Finance says: “These reductions mean action needs to be taken by those who have mortgages in place and have not yet completed. There may be significant savings to be had.” He says lenders will not necessarily approach clients about the fact there is now a cheaper deal available, and many brokers will not proactively do this either, so borrowers should review their situation and see if there is something more competitive available that they can move on to.

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Consider overpaying if you can

Those fortunate enough to have some spare savings cash may want to consider using some of it to reduce what they owe on their mortgage (although if they have other costly debts with higher interest rates, they should pay those down first).

However, there are sometimes restrictions on overpaying. If you have a fixed-rate home loan, many lenders will let you pay 10% of your mortgage balance as an overpayment each year without penalty.

Cut your credit card costs

Many people’s plastic will have taken a pounding during the last few weeks. However, many individuals with credit and store card debt could save hundreds of pounds – or more – by transferring these balances to another provider offering a better rate. Some credit cards are offering interest-free deals lasting for more than two years.

The main benefit of a 0% balance transfer deal is that all of your monthly repayment goes towards clearing the outstanding balance, and therefore the debt can be cleared much more quickly.

There are a number of pretty good deals around. Barclaycard is offering 0% interest on balance transfers for up to 29 months (with a 3.45% transfer fee), while M&S Bank is offering 0% for up to 28 months (with a 3.49% fee).

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Some providers have calculators on their sites that quickly show you how much you may be able to save. For example, M&S Bank says someone transferring £2,000 from a card with a rate of 24% APR and who repays £80 each month could save £616 by switching to its plastic.

Credit card perks

Many savvy shoppers now use a rewards credit card for pretty much all their day-to-day and big-purchase spending – from their morning coffee to the trip of a lifetime and everything in between – but never run up a bill because they pay it off regularly, in some cases every day, via the app.

If you are looking for a credit card that will give you more bang for your buck, here are three of our picks.

Possibly the most valuable UK credit card benefit out there is offered by the British Airways American Express card, according to the Points Guy website. This card, which has no annual fee, lets you earn one Avios point for every £1 spent on purchases. Spend £12,000 in a year on the card and you get a “companion voucher”, which you can use to take someone with you on the same flight for free – so effectively it’s two-for-one travel. The vouchers can be used to book a BA, Iberia or Aer Lingus “reward flight”.

Meanwhile, the zero-fee Amex Platinum Cashback Everyday credit card typically lets you get 5% back on purchases (up to £100 cashback) – plus an extra £10 bonus cashback – for the first three months that you have it. After that, you get 0.5% on spending up to £10,000, and 1% on spending above that amount.

Finally, many people still swear by the John Lewis Partnership credit card where, for every 500 points you collect, you get a £5 voucher to use at John Lewis and Waitrose. You earn five points for every £4 spent on eligible purchases at John Lewis and Waitrose, and one point for every £4 spent elsewhere. If you take out the card by Monday 8 January and spend a minimum of £250 on eligible purchases at John Lewis and Waitrose within 90 days, you will get £40 in vouchers.

All prices and product details correct at time of writing

Homeowners are facing a £19bn increase in mortgage costs as millions more fixed-rate deals expire and borrowers are forced to renegotiate their home loans after the toughest round of interest rate increases in decades.

Despite an escalating price war between lenders cutting the cost of remortgaging in recent days, economists at the US investment bank Goldman Sachs said many UK households would still experience a dramatic leap in repayments compared with the deals they were leaving behind.

In

Homeowners are facing a £19bn increase in mortgage costs as millions more fixed-rate deals expire and borrowers are forced to renegotiate their home loans after the toughest round of interest rate increases in decades.

Despite an escalating price war between lenders cutting the cost of remortgaging in recent days, economists at the US investment bank Goldman Sachs said many UK households would still experience a dramatic leap in repayments compared with the deals they were leaving behind.

In what has been described as a Tory mortgage timebomb by Rishi Sunak’s critics, up to 1.5m households are expected to reach the end of cheaper deals in 2024 – with an increase in annual housing costs of about £1,800 for the typical family, according to the Resolution Foundation thinktank.

As fixed-rate deals expire and households absorb the biggest hit to their finances in the postwar age, with inflation and tax rises taking their toll on spending power, borrowers are turning to a range of measures to cope with the increased costs, from renting out rooms in their homes to drawing down pensions early and even postponing having children.

With the government under pressure before a general election expected in the second half of the year, the Liberal Democrats warned 2024 was set to be the “year of the squeezed middle”.

Publishing research suggesting the typical household would face a hit of more than £4,700 from higher mortgages, taxes and energy bills combined, Sarah Olney, the party’s treasury spokesperson, said: “People are worried sick about paying the bills and having to make big cut backs just to get by.”

Ministers will attempt to claim on Saturday the government is easing the burden on households by rushing through a £10bn cut in national insurance. The cut will do little to offset a much larger six-year freeze on income tax thresholds, however, with tax as a share of the economy set to hit the highest level since the second world war.

Pressure should begin to ease in the spring, with the Bank of England widely expected to cut interest rates to below 4% by the end of the year from the current level of 5.25%.

The expectation of a round of rate cuts is triggering a bidding war among lenders to improve their mortgage offers. HSBC, Halifax and TSB have updated their fixed-rate deals, and the average rate on a two-year fixed home loan has this week fallen to its lowest level for nearly seven months.

Moneyfacts, the financial information service, said on Thursday the average rate on a two-year fixed deal had fallen from 5.92% to 5.87% in a day. However, borrowing costs remain more than double the level two years ago, adding to pressure on households struggling with their energy bills and rising taxes amid the cost of living crisis.

Alice Haine, a personal finance analyst at the investment platform Bestinvest, said: “The mortgage market may be heating up with rate cuts dominating the news, but this won’t fully ease the pain for the roughly 1.6 million existing borrowers with cheap fixed-rate deals expiring this year.

“They still face a heavy jump in interest payments when they switch onto a new product, with the only comfort that the situation could have been much worse.”

About 55% of UK mortgages have been moved on to a higher interest rate since borrowing costs started to rise from a record low of 0.1% in December 2021, and a further 5m mortgages are expected to be repriced by 2026.

Torsten Bell, the chief executive of the Resolution Foundation, said: “Bear this is mind when you read news stories saying ‘homeowners will benefit from a fall in mortgage rates’ – what they mean is that the increase in people’s mortgage bills won’t be as painful as they would otherwise have been.

“I’d gently suggest they won’t feel like they are ‘benefiting’ as their mortgage bill rises by hundreds of pounds a month.”

In forecasts suggesting the peak impact on households would come by the summer, Goldman Sachs said it expected the Bank to begin cutting its base rate from as early as May. It said sticking at higher levels could add £30bn to mortgage repayments by the end of next year, but that a figure of £19bn was more likely if the Bank followed through with expectations.

The Bank’s most senior policymakers pushed back against financial market expectations as recently as last month. After leaving borrowing costs on hold in December, Andrew Bailey, the Bank’s governor, said it was “really too early to start speculating” about rate cuts.

The prospect of a pricing war softening the cost of remortgaging is likely to be seized upon by the government, as the Conservatives battle to overturn a commanding Labour lead in the polls before the general election.

Highlighting easing pressure in the mortgage market, figures from the Bank on Thursday showed the number of new home loan approvals rose for a second month in a row in November to 50,100, up from 47,900 in October.

A Treasury spokesperson said the UK economy was “turning a corner” after inflation had been halved. “We are also supporting households worth £3,700 between 2022 and 2025, and our mortgage charter can make it easier for people to manage monthly repayments and gives extra protections against repossessions.”

The number of first-time buyers who bought a home with a mortgage fell to its lowest level in a decade in 2023, according to a leading lender.

The figures, from Yorkshire Building Society, are the latest evidence that housing affordability has been stretched to the limit by rising mortgage interest rates and high house prices.

The lender calculated that across the UK there were an estimated 290,000 first-time buyers in 2023. That would be down by a fifth compared with 2022, when the number

The number of first-time buyers who bought a home with a mortgage fell to its lowest level in a decade in 2023, according to a leading lender.

The figures, from Yorkshire Building Society, are the latest evidence that housing affordability has been stretched to the limit by rising mortgage interest rates and high house prices.

The lender calculated that across the UK there were an estimated 290,000 first-time buyers in 2023. That would be down by a fifth compared with 2022, when the number reached 370,000, and the lowest since 2013, when the total was 260,000.

In 2021 the number of first-time buyers was put at a 20-year high of more than 400,000 as the coronavirus pandemic prompted millions of people to think about changes to their lives and where they wanted to live, with a stamp duty holiday also strengthening sales.

The fall in the number of first-time buyers last year was less severe than the decrease in the overall number of buyers, said the Yorkshire, which shared its data with PA Media. This meant the estimated proportion of first-time buyers was a slightly bigger share of homebuyers overall last year, at 54%, up from 53% in 2022.

The Yorkshire said that while activity across all borrower types had fallen because of higher interest rates, cost of living pressures and high house prices, first-time buyers remained determined to overcome these challenges to invest in their own bricks and mortar. But it added that borrowers were finding it harder to meet lenders’ affordability requirements.

The new figures come days after fellow building society Nationwide issued data highlighting how stretched housing affordability had become. It said a borrower earning the average UK income and buying a typical first-time buyer home with a 20% deposit would be saddled with a monthly mortgage payment equivalent to 38% of their take-home pay – well above the long-term average of 30%.

At the same time, said Nationwide, deposit requirements remained “prohibitively high” for many. A 20% deposit on a typical first-time buyer home equated to about 105% of the average annual gross income – though this is down from a high of 116% in 2022.

Ben Merritt, the Yorkshire’s director of mortgages, said: “First-time buyers are the lifeblood of the market and are still clearly keen to buy … The wider market relies on them, not least to support purchases higher up the chain.”

However, there is some hope for homebuyers, who endured a rollercoaster year in 2023. Many financial commentators expect several interest rate cuts this year, which should ease the cost of mortgage borrowing.

Just before Christmas, a five-year fixed-rate mortgage deal priced at below 4% went on sale for the first time since May, and brokers believe there will be more cuts over the coming weeks as banks and building societies compete for custom in the run-up to the traditional spring buying season.

The Yorkshire’s calculations are based on lending data from the banking trade body UK Finance up to September 2023, with buyer numbers for October, November and December 2023 estimated in line with previous first-time buyer patterns.

We are in the grip of a mortgage price war, according to some experts – but it probably won’t feel like that if you are staring down the barrel of much higher monthly payments.

It is certainly fair to say that rates on new mortgages have been on a rollercoaster ride in recent months. Last September’s disastrous mini-budget helped push the price of many new fixed home loan deals above 6%.

Since then, lenders have been gradually reducing the cost of their new fixed rates, and the cheapest

We are in the grip of a mortgage price war, according to some experts – but it probably won’t feel like that if you are staring down the barrel of much higher monthly payments.

It is certainly fair to say that rates on new mortgages have been on a rollercoaster ride in recent months. Last September’s disastrous mini-budget helped push the price of many new fixed home loan deals above 6%.

Since then, lenders have been gradually reducing the cost of their new fixed rates, and the cheapest new five-year deals (from, for instance, HSBC, First Direct, Virgin Money and Yorkshire building society) are now priced at below 4%. The availability of deals has also improved.

However, if you are coming to the end of a fixed-rate deal and need to take out a new one, you are still probably looking at forking out a lot more each month.

At the same time, the Bank of England base rate has been climbing, with yet another interest rate rise looking likely, and there’s much debate about what will happen to the housing market.

So what are your options?

Fixed deals ending now

Some experts suggest that with the price of new fixed rates falling almost daily, those people hoping to remortgage now may want to go for a base rate tracker mortgage with no early redemption penalties for the next few months, and then hop over to a fixed-rate deal. That way, they won’t miss out if and when fixed rates fall further.

Others disagree. Ray Boulger at the mortgage broker John Charcol says that in general, if you are not planning to move home in the next year or two and you are looking for a fixed rate, “I’d be inclined to look at what’s available now rather than going on to a tracker [for a short time]”. Now you can get a five-year fix for under 4%, for most people it is “probably right to go straight on to a fixed rate”, he adds.

But do you go for a five-year fix or pay a little more for a two-year one? At the time of writing, the cheapest five-year rate on sale was 3.95% from Virgin Money, while the cheapest two-year fix was priced at 4.2% from Barclays. On Monday (20 February), Platform – part of the Co-op Bank – is poised to launch some five-year fixed-rate deals starting from 3.75%, and two-year fixes starting from 4.15%.

Boulger says: “The reason a lot of people like fixed rates is it enables people to budget. To be able to do that for five years instead of two is actually quite important to some people.”

Chris Sykes at the mortgage broker Private Finance says we are now seeing five-year fixed rates priced at below the official base rate, which is currently 4%. “So, as trackers come at base rate plus a margin often of 0.5% (it can be much lower or higher), you may have a lower rate on a fixed rate than a tracker, which wasn’t the case a couple of months ago, of course.”

Deals ending within a year

There are a great many people in this boat. A lot of remortgage deals are valid for up to six months, so if your deal is ending in, say, five or six months’ time, you can reserve a deal now.

Sykes says that more often than not, you aren’t committed to a rate until nearer to the time of completion, “so you can always apply six months before, then review it nearer the time to make sure you are achieving the best possible rate. If rates have increased, you have one locked in, and if rates decrease, you can change.”

He adds: “There may be some small costs associated with this but I have some smug clients currently sitting on 3% rates locked in from six months ago completing soon.”

Boulger says that if your existing fixed-rate deal is expiring in six to 12 months’ time, it’s very unlikely to be worth paying early repayment charges to leave early in order to go on to a deal that will almost certainly have a higher rate. “Sit tight. Wait until you get to the six-month window and speak to an independent mortgage broker.”

Standard variable rate

In some cases people are currently paying standard variable rates (SVRs) of 7% to 8% or even more. In the majority of cases, now is the time to get off that SVR and switch to a fixed rate, Boulger says.

Sykes says: “There are very few scenarios where someone should stay on the SVR longer than a few months.”

Situations where it may be beneficial to stay on the SVR might include if you are coming towards the end of your mortgage or have a low loan amount, or you are awaiting a sale of your property.

First-time buyers

Boulger says they should “start planning well ahead – a year ahead”. A lot of the advice is what you would expect: make sure your credit file is in good order and that you are on the electoral roll, etc.

Also, decide which broker and solicitor you are going to use as, when you find a property, the estate agent will need that information.

Is now a good time to buy?

Boulger says that for most people, “the right time to buy is when it suits their lifestyle”. Most indices show house prices falling during the last few months. “The time to buy is when the market is still falling and you can negotiate good deals,” Boulger adds.

There is a decent selection of mortgage deals out there for people who can only manage a 5% deposit. However, a bigger deposit will give you access to more choice and better rates.