FTB lending static year on year

Sarah Davidson

October 2, 2012

Despite the dip in transactions, the average loan to value rose from 78.9% to 81.5%, it’s highest since July 2011.

As a result the average deposit size fell to £26,285, 8% lower than in July as lenders showed signs of relaxing deposit requirements for select borrowers.

While first-time buyer house prices rose by 4.7% to £141,918 in August, the affordability of both deposits and mortgage repayments improved on a monthly basis as the average income of a first-time buyer rose.

Deposits in August represented 73% of the average first-time buyer’s annual income, down from 81.7% in the previous month, while mortgage repayments account for 22.2%, down from 23.4% in July.

On an annual basis, the affordability of the average house purchase deposit improved slightly, with deposits representing 0.6% less of a buyer’s annual income.

Mortgage payments are slightly less affordable than a year ago, climbing from 21.6% of a first-time buyer’s income as a result of larger mortgage advances. The average mortgage repayment rate for first-time buyers rose to 4.8% August from 4.6% a year ago.

David Brown, commercial director of LSL Property Services, said: “There are encouraging signs that lenders are relaxing deposit requirements, but it’s not translating into increasing first time buyer purchases. In fact, following a seasonal drop-off in August, first-time buyer numbers are back to their level of a year ago.

“Lending criteria remains incredibly stringent, and lenders are cherry-picking those new buyers with the very cleanest credit histories and largest incomes, limiting the number of buyers able to take advantage of deals with the very highest LTVs.

“We may be seeing lenders begin to react to the Funding for Lending Scheme – but it’s crucial that cheaper finance reaches a much broader selection of new buyers to boost buyer activity and alleviate the pressure on the private rented sector.”

Aspiring to buy

Some 94% of registered tenants stated they wanted to become a homebuyer, but only 7% stated they expected to buy this year. More than half (54%) believed they would make a purchase within five years.

Despite higher average LTVs in August, prospective first time buyers still see saving for a deposit as the biggest obstacle to buying. 47% of buyers are not able to buy because they cannot put together a big enough deposit, up from 41% three months ago. 14% of buyers blamed high transaction costs, down from 15% in May. One in twenty (5.1%) stated the prospect of falling house prices concerned them.

Profile of a first time buyer

The average first-time buyer in August was aged 29 and had an income of £36,000, 2.9% higher than the average of £35,000 in July.

Some 44% of first-time purchases were entirely self-funded in August, compared to 39% in May. However, the bulk of first-time buyers require family help to buy. Over half (53%) received familial help with deposits or mortgage payments, or through inheritance.

Four in 10 first-time buyers (39%) stated they are buying now because they have only recently been in the financial position to do so, up from 36% in May.

First-timers were most commonly looking for houses with two or more bedrooms. 28% were looking for a two bed house and 51% were seeking houses with three or more bedrooms. The next most popular type of property was two-bed flats, for which 14% of first-time buyers were looking in August.

Price expectations

On average, first-time buyers expect house prices to rise by 3.2% in the next year, compared to 2.1% in May. In August house prices in England and Wales rose annually by 2.6% according to the LSL/Acadametrics house price index.

First-time investors expect to remain in their properties for an average of 7.6 years. Only 3% of first-time buyers expect to stay in a property for less than two years.

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