Average FTB rate at 9 month low

Robyn Hall

January 31, 2013

There were 21,900 first-time buyer transactions in December bringing the total to 219,400 in 2012 all of whom are enjoying the drop rates which fell from an average of 4.72% in November to 4.6% in December.

David Brown, commercial director of LSL Property Services, said: “The Funding for Lending Scheme hasn’t yet been a panacea for the market but it is bringing down rates for those buyers able to meet lenders’ requirements. The size of deposits renters must save before they can move into their first home isn’t yet reducing, and this remains the key stumbling block from preventing new buyer numbers returning to anything like their pre-crunch level.”

Buyers with bigger deposits are benefitting from the lower rates as banks keep criteria tight.

The average LTV fell slightly from 79.1% to 78.8% in December which is a fall from 80.1% a year ago while the average deposit size for first timers rose to £28,525, 2.3% higher than in November.

As first-time buyer house prices rose by 0.9% to £134,616 in December and the average LTV, the affordability of deposits fell, representing 83.9% of a first time buyer’s average salary in the month.

However, falling rates for those able to match lenders’ criteria offset the increased average mortgage advance, and mortgage repayments remained stable at 21% of an average first time buyer’s income.

On an annual basis, the affordability of the average deposit worsened from the 80.7% of a buyer’s annual income in December 2011. However, as a result of a smaller average mortgage advance and marginally wealthier first time buyers, mortgage payments are slightly more affordable than a year ago, falling from 21.3% of a first time buyer’s income last year.

The Aspiration Gap

Of those surveyed, 89% of registered tenants stated they wanted to become a homebuyer but only 14% stated they expected to buy in 2013.

Just over a third believed they would make a purchase within five years while one fifth didn’t believe they’d ever be able to buy.

With LTVs falling back in December prospective first-time buyers still see saving for a deposit as the biggest obstacle to buying with 42% of buyers stating they cannot buy because they cannot put together a big enough deposit.

And 14% were concerned they didn’t have a big enough income to support mortgage payments while 13% were concerned over high transaction costs.

Just one in 16 stated the prospect of falling house prices concerned them.

Brown added: “There is still a yawning aspiration gap between those who want to buy and those who are in any sort of position to purchase their first home.

“The fact that nearly one fifth of renters don’t believe they’d ever be able to buy highlights that when the first-time buyer mortgage market returns to buoyancy, informing those frustrated renters of the changed climate will be a key priority.”

The profile of a first time buyer

The average first-time buyer in December was aged 28 and had an income of £34,000, 0.7% lower than the average of £34,223 in November.

Nearly half of all first-time buyers (49%) in December required familial help to buy.

Of those, 36% received direct financial help from relatives for their deposit while 11% benefitted from an inheritance.

And 45% of first-time purchases were entirely self-funded in December.

Four in ten first-time buyers (38%) stated they are buying now because they have only recently been in the financial position to do so.

First timers were most commonly looking for houses with two or more bedrooms. 31% were looking for a two bed house and 40% were seeking houses with three or more bedrooms. The next most popular type of property was two-bed flats, for which 18% of first time buyers were looking in December.

Brown said: “Although the range of high LTV deals has improved, banks are still incredibly cautious about their level of lending in this bracket, and its still tough for most buyers to secure a mortgage without more than a 15% deposit. This is leaving thousands of buyers reliant on the Bank of Mum and Dad or other familial assistance to secure their first home, a fact which will need to change for the first time buyer market to return to full health.”

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