First-time buyer deposits fall 10pc in a year

Sarah Davidson

June 27, 2014

First-time buyer deposits stood at £24,637 in May, £2,745 less than the year before.

This is the fourth consecutive month they have fallen below the £25,000 mark.

David Brown, commercial director of LSL Property Services, said: “Help to Buy has helped support the first-time buyer market over the past year.

“It has encouraged banks to extend more loans to lower equity borrowers, relieving some of the burden of saving for a larger deposit often out of their reach

“Savings rates have been stuck at rock bottom for over five years, wages are only just beginning to show signs of growth, and the cost of living has been mounting all the while.

“Without Help to Buy, these stumbling blocks may have been too large for some prospective home-owners to overcome.”

First-timer sales slipped by 5% in May however as MMR held back higher LTV lending.

Brown added: “That is most likely a temporary blip but there may be some more permanent side-effects. The new rules demand more extensive affordability testing of first-time buyers, including stress testing against a potential base rate rise.

“Some of the bottom tier of first-time buyers may find they are no longer eligible to borrow. If Governor Carney chooses to exercise his new powers over to loan-to-income ratios, first-time buyers could be even more significantly affected.”

The average deposit represented 67% of a first-time buyer’s annual income in May compared to 77% 12 months ago.

First-timer mortgage rates are creeping back up however, as they climbed by 0.08% in the last three months.

The average purchase price also increased 7% year-on-year in May to £146,887, £9,000 more than May 2013 when it stood at £137,561.

Brown added: “It is imperative to let the scheme run its course. The property market is already weighted in favour of home-owners, who have benefitted from bricks and mortar price-growth.

“Punishing first-time buyers by pre-maturely cutting back Help to Buy would do more damage than good.

“To keep price-rises in check we need to upscale housing development and build more new homes offering wider choice and supply to buyers which will dampen any danger of high price rises.”

House purchase approvals fell for the fourth consecutive month in May, the latest e.surv Mortgage Monitor shows.

However there were 9,670 loans to borrowers with a deposit worth less than 15% of their property in May, 3% more than April and 40% more than a year before.

In London the average first-time buyer purchase price was £267,572 in the three months to May, over three times that of Northern Ireland (£83,899).

London first-timers also paid the largest deposits, at £65,989, typically 25% of the value of their property. This is double the average deposit in the South East (£30,484), where they made up 16% of the value of the property.

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