February Market Brief - Record share of first-time buyers kick-starts 2026 housing market

• First-time buyers purchased 34.3% of homes sold across Great Britain in January - the highest share recorded in any January since our records began in 2006 (chart 1).
• In London, first-time buyers now account for 48.3% of purchases, up from 22.4% a decade ago, partly reflecting the fall in existing owners choosing to move (table 1).
• 93% of January’s first-time buyers secured a sub-5% mortgage rate - the highest share since Autumn 2022, and up from 67% in January last year (chart 2). Meanwhile, 96% of movers secured a sub-5% rate last month, up from 83% in January 2025.
• Nearly one in four first-time buyers (24.2%) took out a 90%+ LTV mortgage last month, the highest proportion since 2008.
• Improving affordability saw fewer first-time buyers stretch their mortgage terms, with the share borrowing over 30 years edging down from last year’s peak (chart 3).

Aneisha Beveridge, Research Director at Connells Group, said:

“After a fairly sluggish end to 2025 - not helped by the Autumn Budget casting a shadow over buying decisions - the new year has brought a shift in tone. January started quietly, partly due to how the holidays fell, but momentum built as the month progressed. By the end of January, applicant registrations were back in line with 2025 levels, which is encouraging given how strong demand was this time last year ahead of the April Stamp Duty deadline.

“Falling mortgage rates, including the first sub-3.5% deals for some time, have been the main driver of early-year activity. First-time buyers have been the biggest beneficiaries, particularly where higher loan-to-value products have become more competitively priced. That’s widened the pool of people able to buy, and we’re also seeing more new purchasers shorten their mortgage term - a shift that can deliver substantial long-run savings. For example, moving from a 35 to a 30-year term on a typical £200,000 loan could save around £32,000 in interest if rates stay where they are today.

“Rising first-time buyer numbers should also help support overall transaction levels this year, especially at a time when existing homeowners are moving less often. And because many of these purchasers are currently renting, a steady transition into homeownership could gently ease pressure in the lettings market, taking a little of the heat out of rents if the trend continues.

“The Bank of England’s tighter-than-expected vote last week suggests mortgage rates could drift down a little further, which should support activity over the coming months. But borrowing costs aren’t the only barrier. Transaction costs - particularly Stamp Duty - remain a significant deterrent for many existing homeowners, meaning these structural constraints are likely to keep a lid on mover activity even as conditions slowly improve.”

First-Time Buyers Take a Growing Share of the Market

Chart 1

First-time buyers played an increasingly prominent role in the housing market at the start of 2026. They purchased 34.3% of all homes sold across Great Britain in January, up from 33.3% last year and more than double the 16.8% recorded a decade ago (chart 1). While many existing homeowners remain cautious about moving, the first-time buyer segment continues to strengthen, supported by easing mortgage rates and wage growth outpacing house prices in many parts of the country.

These affordability improvements, underpinned by lenders offering a wider mix of higher loan-to-value (LTV) products, have helped bring a slightly less-affluent cohort of buyers into the market. The average first-time buyer spent £244,740 on their home last month, around 1.5% less than a year earlier, reflecting both softer pricing and a gradual widening of who can afford to buy.

Regional Patterns in First-Time Buyer Activity

First-time buyer demand strengthened across much of the country at the start of the year, with three regions — the South East, East Midlands and West Midlands — recording their highest January share of first-time buyer purchases since our records began. These gains highlight how affordability improvements are filtering through most clearly in relatively accessible markets that represent better value. In these locations, easing mortgage rates and rising wages are having the greatest impact on borrowing power.

Within the South East and East Midlands in particular, the rise has been especially pronounced. The South East posted the largest annual increase in first-time buyer share (+6.1%), closely followed by the East Midlands (+4.5%) (table 1). These are areas where competitively priced higher loan-to-value mortgages have enabled a broader mix of households to buy, drawing in purchasers who may have been locked out in recent years.

London remains the outlier, continuing to record the highest first-time buyer share anywhere in the country. In January, 48.3% of homes sold in the capital went to new buyers, more than double the 22.4% share ten years ago (table 1). But this strength partly reflects the fact that existing homeowners are moving less often, deterred by higher transaction costs such as Stamp Duty, which continues to act as a brake on mover activity even as conditions slowly improve.

Table 1

The Impact of Falling Mortgage Rates on First-Time Buyers

Lower mortgage rates remain the driving force behind the revival in first-time buyer activity. The average new first-time buyer taking out a fixed-rate mortgage in January secured a rate of 4.41%, down from 4.86% a year earlier. For someone borrowing £200,000 over 30 years, this reduction equates to a saving of around £3,240 over the five-year fixed term. It also marks the lowest rate for first-time buyers since September 2022.

Consequently, 93% of first-time buyers in January secured a mortgage below 5% – the highest share since Autumn 2022 and up sharply from 67% a year earlier (chart 2). Most buyers on 5%-plus deals are borrowing more, with an average LTV of 87%, compared with 82% for those securing sub-5% rates.

Movers have also benefited: 96% secured a sub-5% rate, up from 83% in January 2025. In fact, 52% of homeowners making a move last month locked in a sub-4% deal, compared with just 4% a year ago. Lenders have become increasingly competitive as conditions stabilise, and first-time buyers remain the most responsive to the improvement.

Chart 2

Shorter Mortgage Terms

Lower borrowing costs are also enabling some new buyers to shorten their mortgage terms after several years of stretching them out to manage monthly repayments. In January, 52% of first-time buyers opted for a mortgage lasting more than 30 years (chart 3). While still high by historic standards, this marks a gradual decrease from 55% a year earlier and 60% at the peak in 2023. In the five years leading up to 2020, fewer than half of first-time buyers needed to borrow over such long periods, and although the market has not fully returned to those levels, the direction of travel is positive.

The prevalence of longer terms varies widely across the country. They remain most common in the South of England, where affordability pressures are most acute. In the South West, 58% of new buyers took out a +30-year mortgage, while in the South East the figure was 56%. Meanwhile, Scotland, one of the most affordable regions, saw just 40% require such extended terms.

Chart 3

A Rebound in Higher Loan-to-Value Lending

Easing mortgage rates, combined with earnings rising faster than house prices, have also helped more first-time buyers access higher loan-to-value products. In January, nearly a quarter of new buyers (24%) in Great Britain secured a mortgage at 90% LTV or above, the highest proportion since May 2008 and up from 19% a year earlier. This reflects growing confidence among both lenders and buyers, alongside a gradual unwinding of the more cautious lending practices that were introduced following the global financial crisis.

But the ability to borrow at high LTVs remains heavily shaped by regional affordability. Scotland continues to stand out: there, 42% of first-time buyers took out a 90%+ LTV loan in January, up from 19% last year (chart 4). Meanwhile, in London, where buyers often don’t earn enough to borrow at high LTVs, the share was just 14%. Even so, this figure has more than doubled from 6% in January 2025, signalling that improving affordability is beginning to reopen the door to smaller deposit borrowing in the capital.

Chart 4