Dip in FTB demand slows completions

Ryan Fowler

January 30, 2015

There were 24,800 first-time buyer completions in December 2014, 4.2% fewer than in November and 7.8% fewer than 26,900 a year ago.

However, 2014 as a whole still saw substantially more first-time buyer sales than 2013, with 311,300 first-time buyer completions in 2014 – 15% more than 270,500 in 2013.

The average first-time buyer purchase price has risen 3.0% year-on-year, reaching £155,413 in December.

First-time buyer deposits have also risen – but at a much slower pace – as Help to Buy has allowed more higher LTV borrowers access to finance.

The latest Mortgage Monitor from e.surv showed that lending to higher LTV borrowers increased 5% month-on-month in December.

The average first-time buyer deposit was £27,384 in December 2014, up from £26,961 in December 2013, with recent stamp duty savings helping first-timers to put together larger deposits.

First-time buyers paying the average purchase price (£155,413) would have been liable for stamp duty fees of around £1,550 before the graduated system was implemented, but this would now have been reduced to £600 – meaning savings averaging £950 which have boosted their deposit capacity.

Adrian Gill, director of estate agents Your Move and Reeds Rains, said: “On paper, now is a fantastic time to get onto the housing ladder. Mortgage rates are at record lows, pushed downwards by falling inflation and rising certainty that an interest rate rise will be put off until the tail end of the year – if then.

“At the same time, wages are healthier, and first-timers are seeing their finances recover from the plague of the recession.

“On top of this, the government has extended an additional helping hand to first-timers with the revision of stamp duty, which will particularly benefit those buying in the capital.

“And the Help to Buy scheme remains in place, providing a shortcut to saving for a large deposit, meaning first-timers can lock into the property market before prices climb further.

“But despite this combination of favourable conditions, the number of first-time buyers has fallen back. Mortgages are more accessible than ever, but fewer buyers are taking advantage of the finance on offer.

“Misunderstanding over new regulation, global economic uncertainty and a lack of cheap homes are stymieing the recovery in first-time buyer numbers, causing a temporary dip in December.”

Your Move and Reeds Rains asked tenants what was preventing them from getting on the housing ladder, and discovered that the challenge of putting together a deposit was the biggest block to homeownership.

Seven in ten (68%) prospective buyers cited the inability to put together a cash deposit as one of the reasons preventing them from getting onto the housing ladder in December, while the second most popular reason was having insufficient income to support mortgage repayments (25%).

One in five (18%) prospective buyers named concerns over expensive transaction costs, including stamp duty and legal fees as one of the barriers to buying, and 11% worried that interest rate rises may push up their mortgage repayments.

Worries about decreasing income (7%), unemployment (6%) and falling house prices (6%) also concerned a significant portion of prospective buyers. Finally, 6% of prospective buyers said they were waiting to see what would happen at the General Election in May.

Under half (43%) of first-time buyers said they were able to self-finance their purchase in December.

A third (34%) reported that relatives helped them to put together a deposit, compared to 37% in December 2013. Use of the Help to Buy Scheme helped fill this gap – in total, 9% had made use of Help to Buy in December 2014, with 4% taking advantage of the equity loan scheme and 5% using the mortgage guarantee scheme. This compares to just 3% reporting they had used either aspect of Help to Buy twelve months before.

A further 9% of first-timers revealed they had benefited from an inheritance. And 4% reported that relatives were going to help them with mortgage repayments.

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