First-time buyer levels in Britain hit their highest number since the recession in July, according to a new report.
Data from research conducted by Your Move and Reeds Rains shows that the average first-time buyer paid £161,985 for their home last month, 8.9% more than one year ago.
During July, there were 29,700 purchases of property by first-time buyers, 4.9% more than in June. The average deposit required by a first-time buyer looking to secure a home was £27,975.
In addition, the sales figures in July represented a 28% rise from April 2015, meaning there has been an increase of £6,5000 rise during the last three months alone. Average deposits have risen by 10% in comparison to June 2014, where a figure of £25,429 was recorded, meaning there has been a rise of £2,546.
The cost of a deposit as a proportion of a first-time buyer’s typical income hit 71.6%, up by 3.1% in one month and by 5.4% annually. Moreover, the average first-time buyer’s LTV is slowly dropping, meaning initial buyers are having to stump up more cash up front with larger deposits.
July’s rate of 82.7% showed a 0.5% decrease in LTV from June and a 0.2% year-on-year decrease.
Adrian Gill, director of estate agents Your Move and Reeds Rains, believes that the post-election surge in activity has receded, giving way to more consistent optimism. He feels that first-time buyers are beginning to realise that there is no immediate risk to the property market from the Government.
‘Incentives attractive to first time buyers such as the Help to Buy schemes are running along steadily, while further low cost housing development is being encouraged to entice more people onto the ladder,’ Gill noted. ‘This month’s particularly high transaction rate is also partially due to expectations that the Bank of England may announce a rate rise sooner rather than later. The thought of months of rock-bottom mortgage rates being brought to an end is encouraging many wavering first time buyers to jump on the property ladder before repayment costs shoot up,’ he added.
UK first-time buyer sales at post-recession high
Mr Gill went on to say that some first-time purchasers, ‘may have held back briefly when considering the rising deposit costs.’ He notes however that, ‘real wages have been growing too and first-time buyers are able to shoulder the short term burden of a slightly higher deposit to spare the risk of losing out on a good mortgage deal.’
Mortgage rate falls
In spite of some lenders beginning to take away their cheapest deals, the average first-time buyer mortgage rates continue to fall, albeit at a slow pace. The typical rate fell by 0.75% in the year to July 2015. Moreover, the rate fell by 0.12% during the last three months and by just 0.02% between June and July.
‘So long as the economy continues on its upward trajectory and the aspiration for home ownership remains strong, property prices can only increase,’ observed Gill. ‘While the higher deposit and mortgage costs this brings may be a bother for some, taking a longer view, it’s a sign of a vibrant and dynamic property market,’ he continued.
Gill also said that, ‘What may be more concerning for first time buyers is that average mortgage rates may be on the verge of climbing back up. But first time buyers shouldn’t worry. When a rate rise does come it is likely to be slight and gradual so home ownership will by no means suddenly become a costly dream. Instead, it will remain an affordable reality for those first time buyers with the drive and determination to make it so.’
Unsurprisingly, London was the most expensive place for first-time buyers, with the average property for initial purchasers here costing £274,868 in the three months to July. Second on the list was the South East, where prices cost £201,652 on average. Nationally, the average cost of a first-time buyer property was £149,713 during the same three-month period.
The least expensive places in which first-time buyers can purchase a property were found to be the North East and Northern Ireland, where prices stand at £109,240 and £106,176 respectively.