First-time buyers across the UK are finally catching a break, with a significant easing in the financial pressures of getting onto the property ladder. According to a major new analysis from Nationwide Building Society, affordability has tangibly improved over the past year, sparking a notable resurgence in market activity among young purchasers.
The Perfect Storm for Affordability
The building society's senior economist, Andrew Harvey, pinpointed the key drivers behind this shift. "With price growth well below the rate of earnings growth and a steady decline in mortgage rates, affordability constraints have eased somewhat over the past year, helping to underpin buyer demand," he stated. This combination of stagnant house prices and rising wages has allowed potential buyers' savings to gain ground.
This improving backdrop has been supercharged by a wave of mortgage rate cuts from major lenders. Institutions including Nationwide, HSBC, NatWest, Barclays, and Halifax have all trimmed their fixed-rate deals. Some headline rates are now available from around 3.5% to 3.6%, a sharp drop from the peaks witnessed during the recent interest-rate shock. The prospect of further Bank of England base rate cuts later in 2026 is encouraging even fiercer competition among lenders.
The data underscores a clear market response: first-time buyer activity was approximately 20% higher in 2025 than in the previous year. Furthermore, the share of high loan-to-value mortgages—where deposits are 15% or less—has reached its highest level in over a decade, signalling renewed lender confidence in this segment.
The Daunting Deposit Divide
Despite the improved monthly repayment outlook, the upfront challenge of saving for a deposit remains a formidable hurdle. Nationwide's research reveals that the average first-time buyer now needs to save £23,000 for a deposit on a typical starter home. Based on setting aside 10% of take-home pay each month, this would take nearly six years to accumulate.
However, a stark regional divide paints a picture of two Britains. In inner London, the typical deposit soars to £44,800, requiring an average worker a daunting nine years to save. Other high-deposit regions include outer London (£32,800), the outer south east (£26,300), and the south west (£24,700).
In contrast, the path to homeownership is markedly shorter in other areas. Buyers in the north east need an average deposit of just £13,100, potentially saved in around four years. Scotland (£13,900), Yorkshire and the Humber (£15,400), and Wales (£17,300) also rank among the most accessible parts of the UK for first-time purchasers.
Young Buyers Regain Confidence
The convergence of flat prices and lower borrowing costs is translating into renewed optimism among younger generations. Separate figures from Barclays indicate that improving affordability and greater certainty over housing policy are drawing this group back. One in three 18- to 34-year-olds now say they plan to buy a first or new home in 2026—more than double the national average of 16%.
Generation Z savers are already making significant headway, having built average deposits of £19,442, with plans to add almost £9,000 more this year. Confidence among young buyers has climbed sharply, from 33% at the start of 2025 to 40% by year's end. A telling statistic from December shows 22% of young buyers used a deposit of less than £20,000, up from just 13% a year earlier.
Nationwide's key affordability measure reflects this shift. A buyer on an average income purchasing a typical first-time buyer home with a 20% deposit would now spend around 32% of their take-home pay on their mortgage. This is only slightly above the long-term average of 30% and far below the 48% peak seen in the late 1980s, marking a meaningful return towards more sustainable norms for a new generation of homeowners.
