Number of first time buyers soars by 60% since 2011

11th January 2016

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The amount of people who got onto the housing ladder in 2015 is estimated to have reached 310,000, marking a 60% rise since 2011, according to new research.

However the annual Halifax First-Time Buyer Review shows that last year’s total represents a marginal decline, of -0.5%, from 311,700 in 2014 – the first annual fall in the number of first-time buyers since 2011.

But in contrast the number has risen by almost two-thirds over the subsequent four years, from 193,700.

The lender said the decline in first-time buyers last year is in line with general residential house purchases, and is partly due to lack of supply.

The average price paid by first-time buyers increased by 10% in 2015, from £172,563 to £190,180; taking the price above the previous peak in 2007, of £174,994, for the first time.

In addition the average first-time buyer deposit in 2015 was £32,927; 13% higher than in 2014, at £29,094 and 88% higher than the average deposit in 2007 of £17,499.

Higher house prices paid by first-time buyers during the year has resulted in an increase in the average deposit paid. In the South East the average deposit paid rose by 24% in the past year, from £35,582 to £44,024.

Not surprisingly, the average first-time buyer deposit is highest in Greater London, at £91,409 – five-and-half times more than in Northern Ireland, which stood at £16,578; the lowest.

Whilst a mortgage term of 25 years has been the norm for some time, the research highlighted that many first-time buyers are increasingly taking out mortgages where payments are spread over a longer period.

In 2007 the proportion of first-time buyers taking up a 35-year mortgage stood at 16%. But by 2015 this figure had grown to over one-in-four, at 26%. Over the same period, the share of mortgages with a 20 to 25 year term dropped from 48% to 30%.

Despite higher house prices, the proportion of disposable earnings devoted to mortgage payments by a first-time buyer stood at 32% during the third quarter of 2015, marking a substantial improvement compared with the summer of 2007 when this figure reached a peak of 50%.

Record low mortgage rates, coupled with earnings growth, it appears have been the key drivers behind this improvement.

Craig McKinlay, mortgages director at Halifax said: “For the second year in succession, the number of buyers getting on the first rung of the housing ladder has reached 310,000.

“Although the average price of the typical first-time buyer home has grown by 10% in the past year, the number of buyers taking that first step onto the housing ladder has been supported by favourable economic conditions; namely, record low mortgage rates, rising employment and real pay growth.”

First-time buyers also accounted for 46% of all house purchases made with a mortgage in 2015, the same as in 2014. This share has grown from 36% at the start of the housing downturn in 2007.

Based on the average price paid by first-time buyers, most regions have benefited from the Stamp Duty changes in December 2014. The largest saving is made by first-time buyers in London with someone buying at the average first-time buyer price of £367,990 now paying £8,399 in stamp duty fees compared to £11,039 before the change – a difference of £2,640.

Buyers in most of the northern regions, as well as those in Scotland, are making substantial savings of over £1,000. With an average house price below the lower threshold of £125,000, typical first-time buyers in the North, Wales and Northern Ireland still pay no stamp duty.

McKinlay added: “Whilst affordability has improved since 2007, in many parts of the country the ratio of the average house price to earnings is still significantly above the long-term average of 4.0. This is a concern as it could prevent many potential buyers from entering the market.”

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