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First-time buyer numbers up 8pc

Ryan Fowler

May 30, 2014

There were 26,300 first-time buyer transactions in April 2014, up 8% from 24,400 in March 2014.

Compared to last year, the number of first-time buyers was 47% higher in April 2014, with the revival in new buyers aided by the Help to Buy Scheme, which has facilitated more high loan-to-value lending. First-time buyer deposits fell 7.5% year-on-year to £24,618 in April. It was equivalent to a drop of over £2,000 from £26,623 in April 2013.

1 in 10 first time buyers (11%) say the financial assistance of Government schemes such as Help to Buy enabled them to get their foot on the property ladder.

David Brown, commercial director of LSL Property Services, said: “The tightening of mortgage criteria hasn’t dampened the appetite for first-time-buyer property.

“Many more new buyers are making the jump onto the property ladder, while deposit requirements – and mortgage rates – remain relatively low. Many buyers are locking into fix-rate deals that promise low repayments for the next few years, offers that may not be around much longer.

“With real wage growth around the corner, and expectation that prices will continue to rise, getting on the property ladder is not only becoming more realistic, but more of a priority. The prospect of the end of Help to Buy may add further fuel to the momentum in the market.”

First-time buyer purchase prices rose 10% over the year to April 2014, reaching an average of £149,655. The average first-time buyer mortgage size has outpaced that growth (+15% year-on-year), enabled by greater high loan-to-value lending. In April, first-time buyers took out a mortgage worth £125,037 on average

But first-time buyers in London are feeling the brunt of the impact of the Mortgage Market Review and the tighter lending criteria. Nearly a third of first-time buyers in London say they have found it more difficult to get a mortgage since the MMR regulations came into force. But across the rest of the UK, only 1 in 5 found that the new procedures have impacted their application process. The majority of those surveyed (53%) think that the new MMR regulations are a positive step for the market.

David Brown, commercial director of LSL Property Services, said: “The new regulations may mean more rigorous testing for new buyers, but they will help ensure they are better informed about such an important financial decision. And with talk of an interest rate rise ongoing, it is vital that this possibility is taken into account when considering the application of new buyers. Greater stress-testing and questioning may sometimes feel invasive, but it could prevent greater heartbreak in the long-run. The new regulations will help ensure first-time buyers are clued up as to how their personal finances will perform within a more testing economic arena.”

In April, 94% of tenants registered with Your Move and Reeds Rains wanted to become homeowners.

Over one fifth (22%) of tenants are expecting to be able to by the end of 2014 and a further third (34%) believe they will be able to buy within the next five years.

Over a quarter of tenants (27%) believe they will buy at some point in the future, but cannot pinpoint when.

However the aspiration gap is widening. The proportion of tenants who think they will never be able to afford to buy has risen to 14% in April 2014, up from 10% in February.

Lack of a cash deposit remains the biggest obstacle to homeownership for prospective buyers, with 44% of tenants reporting that saving a deposit was a factor prohibiting them from buying this April.

The second most common constraint preventing tenants buying was the high transactional costs like stamp duty and legal fees (16%).

Only 10% of tenants say they are worried an interest rate rise will push up mortgage repayments in April, down from 13% in February 2014. Other concerns included insufficient income to support a mortgage (15%), possibilities of future unemployment (7%), falling house prices (4%) and decreasing income (4%).

Brown said: “Saving for a deposit remains the number one challenge preventing many prospective home-owners from getting on the ladder – even with Help to Buy in position.

“The scheme is still a keystone in the recovery of the first-time buyer market. Some areas of the country are still limping out of the recession slump.

“Buyers in these areas are still waiting to feel the effects of the recovery in their wallets. In the meantime, while prices continue to rise, they need help in order to be able to get onto the housing ladder.”

In April, the average first-time buyer was 30 years old and earning an annual salary of £36,276. Higher house prices in the capital were reflected in the age of buyers in London, with the average first-time buyer was earning an annual salary of £41,667.

First-time buyers in the capital paid an average of £293,671 per property in the three months to April, far and away more than all other regions of the UK, including the South East (£195,185).

Northern Ireland was the cheapest region for first-timers, with an average purchase price of £85,772. Yorkshire & Humber and the North East were home to the highest number of high LTV borrowers in the three months to April, with average deposits of £14,546 and £14,896 respectively.

Brown added: “The London market tells a very different story to the rest of the country. There are many affordable properties still on the market outside of London and the South East.

“Further afield from the capital, price rises have been much more subdued. In Yorkshire & Humber, it’s still possible to buy a two-bedroom terrace in Sheffield for under £33,000.”


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