Bank of Scotland reports decline in number of first-time buyers amid tougher property market conditions

Scotland sees a decrease in the number of first-time buyers, falling by 14% between January and August 2023 compared to the same period in 2022, according to the Bank of Scotland First-Time Buyer Review. However, this decline is not as steep as the UK overall, where first-time buyers decreased by 22%.

Despite the decrease, first-time buyers in Scotland still make up 50% of all home loans agreed upon in the first eight months of this year, the same proportion as in 2022 and 2021. This is due to a slowdown in activity in the wider housing market.

The housing market in Scotland faces several challenges that have affected first-time buyers, including increases in mortgage rates and intermittent availability of mortgage deals. In addition, inflation has become an additional barrier to saving for a deposit, which was already difficult for many. Currently, the average deposit required for a new home in Scotland is £38,871.

According to Graham Blair, Mortgages Director at the Bank of Scotland, Scotland offers affordable options for first-time buyers, with Inverclyde, West Dunbartonshire, and Ayrshire being the most affordable places in both Scotland and the UK. Although lenders are prepared to assist, with approximately £5.5 billion in lending provided to first-time buyers in the first half of this year, the challenges for those buying their first property remain. Despite a slight drop in the average deposit raised compared to last year, the amount is still substantial, and overall, the number of first-time buyers has decreased in the first half of this year compared to the previous year.

However, many first-time buyers were able to enter the property market in the past two years by taking advantage of low interest rates and government support, such as Land and Buildings Transaction Tax relief and Help to Buy schemes. As a result, between January and August of this year, the average number of people entering the property market for the first time was 22% higher than ten years ago.

The average price paid by first-time buyers in Scotland is now £188,252, marking a 1% increase over the last year. However, this is still 35% lower than the UK average of £288,030. Interestingly, the average deposit required for a first home in Scotland is £38,871, which is the second-highest deposit as a percentage of the property price across the UK.

Scotland boasts nine of the top 10 most affordable places for new buyers in the UK, highlighting the favorable conditions for first-time buyers in the country.

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