Housebuilder reports shrinking first-time buyer numbers as mortgage rates surge

High borrowing costs are dampening demand for new homes, a housebuilding company has claimed. MJ Gleeson has become the latest housebuilder to make the claim as the proportion of first-time buyers shrinks.

The low-cost builder, whose homes start from about £116,000, said it sold fewer properties in the year to the end of June. It completed the sale of 1,723 homes in the latest financial year, compared to 2,000 the previous year.

The reduction in house sales reflects the downturn in the wider economy and the immediate impact of higher mortgage rates on buyers’ confidence, the company said.

The UK currently has the highest interest rates in 15 years, with the Bank of England pushing the UK's up to 5 per cent last month. Millions of mortgage holders are set to see their monthly payments increase when their fixed-rate deals expire over the next year.

Along with high house prices, first-time buyers are also facing high borrowing costs, with the average five-year fixed-rate deal surpassing 6 per cent earlier this week, according to Moneyfacts.

MJ Gleeson also said the average selling price of new homes had gone up by 11.3 per cent year-on-year to £186,200, from £167,000, largely because of a shortage of properties on the market and because builders’ material and labour costs went up over the period.

It also flagged a significant shift in the age demographic of its typical buyers in the second half of the financial year. First-time buyers accounted for about 50 per cent of open market reservations, compared to 71 per cent in the same period last year. The proportion of buyers over the age of 55 doubled, from 10 per cent last year to 20% this year, it said.

But the builder said its houses are becoming more appealing to buyers