First-time buyers are being squeezed out of the property market by soaring house prices, with numbers dropping by 20 per cent during June, research showed today.
People buying their first home accounted for just one in five sales during the month, down from one in four in May, and the lowest proportion since May last year.
The National Association of Estate Agents said buyers aged between 18 and 30 accounted for only 3 per cent of all purchasers during the month, the lowest level it has ever recorded.
The group warned that the plight of first-time buyers is expected to get worse going forward.
Nearly 80 per cent of estate agents expect the Bank of England’s recent call for lenders to limit mortgage advances to people borrowing more than 4.5 times their income to hit those buying their first home.
The figures came as haart warned the typical homebuyer would face a stamp duty bill of at least £7,500 by the end of 2016 if house prices continued to rise at their current rate.
The independent estate agent said if property values continued to increase at an annual rate of 10 per cent, the average property would cost more than £250,000 in two-and-a-half years’ time.
This rise would push people buying an averaged priced home into the 3 per cent stamp duty band, up from the 1 per cent band for properties costing up to £250,000.
Mark Hayward, managing director of the National Association of Estate Agents, said: “Things are getting even tougher for first-time buyers.
“Not only do you now need to stump up ridiculously large sums of money in terms of deposits and stamp duty to be able to get on the ladder, but new rules mean buyers will also have to prove they can easily afford repayments now and in the future.
“Alongside this, a scaling back of the Government’s Help to Buy scheme and the implementation of the Mortgage Market Review in April will also have a significantly negative impact on the first-time buyer market.”
But there was some good news for potential buyers during the month, with the average number of properties estate agents had on their books increasing to 46, up from 44 in May.
While the figure still remains low compared with historical standards, it was accompanied by a fall in the average number of buyers registered with estate agents, with these dropping to 371, down from 374, helping to ease the mis-match between supply and demand.
In a further sign that the property market is beginning to slow down, there was also a fall in sales agreed during the month.
The typical estate agent branch sold nine properties in June, down from an average of 10 homes in May.
The drop is likely to help further ease concerns that a bubble was building up in the property market.
But there is growing evidence that the market is beginning to cool as more homes come on to the market, and buyers become more cautious in anticipation of future interest rate hikes.
Katie Price is planning to sell her West Sussex mansion, where she found her husband cheating with her best friend.
The glamour model wants to make a fresh start by selling the £2m property, which includes stables – one of several locations where the cheating took place.
The stables are a painful reminder for horse-loving Katie following her husband’s confession of an affair with her best friend Jane Pountney earlier this year.
It follows fresh revelations today that her husband Keiran Hayler also had an affair with her friend Chrissy Thomas in road lay-bys.
Katie told The Sun: “I’ve known Jane and Chrissy for years. They are two people who I thought would have my back and Kieran has been in my house with all three of us, knowing he is sleeping with all of us.”
Keiran is alleged to have had a seven month affair with Jane – on many occasions in the home as well as the stables.
He told the Sun on Sunday: “It was around 1am and I was hammered from drinking Porn Star martinis. I head up to the stables where a friend of mine was meant to be staying and Jane followed me. We had sex standing up.”
Katie is pregnant with her fifth child – her second with Keiran.
She bought the luxury six bedroom home in 2010 and moved in with her then husband Alex Reid.
She was previously married to singer Peter Andre, who is the father of two of her older children. Her fifth child is from a relationship with Dwight Yorke.
Katie had initially tweeted that she would be getting a divorce from Keiran. But it seems those plans may now be on hold after she co-hosted a baby shower with him and also suggested that she may take his name if he could prove himself to her following his affair. The property is being sold privately.
So, where will the glamour model go next? If she remains in West Sussex, here are some options with her £2m budget.
1. Five bedroom house in East Grinstead.
2. Six bedroom house in Burgess Hill.
3. Six bedroom house near Pulborough.
The number of people getting on to the property ladder hit a seven-year high during the first half of the year, figures showed today.
An estimated 144,500 people bought their first home in the six months to the end of June, the highest number for the first half of the year since 2007, before the financial crisis struck.
The total was 25 per cent up on the same period of 2013, according to mortgage lender Halifax.
It was also the third consecutive year in which first-time buyer numbers have surpassed the 100,000 mark during the six months to June.
The increase in first time buyers outstripped the improvement in the number of existing homeowners who bought a property, with the number of next time buyers increasing by only 20 per cent during the period.
As a result, first time buyers accounted for 46 per cent of all home purchases during the six months, the highest proportion since 2000.
Despite recent strong house price inflation, low interest rates helped to keep mortgage repayments affordable for people buying their first home.
The typical person getting on to the property ladder had to devote 31 per cent of their post-tax income to mortgage repayments.
Halifax said this figure was significantly below both the peak of 47 per cent of earnings reached during the first half of 2007 and the long-term average of 34 per cent.
But first time buyers did have to put down significant deposits, with these averaging £31,129 – 9 per cent more than they put down a year earlier.
The size of the deposit as a proportion of the purchase price has almost doubled since the financial crisis struck, to stand at 19 per cent during the second quarter of 2014 compared with 10 per cent in 2007, as lenders withdrew high loan-to-value mortgages.
The average age of a first time buyer has also increased, rising to 30 years old in 2014, compared with 28 in 2009.
Craig McKinlay, mortgages director at Halifax, said: “First time buyers are an important segment on the housing market, accounting for 46 per cent of home purchases in the first six months of the year.
“The resurgence in the number of first time buyers getting on to the housing ladder has been buoyed by improving economic conditions, rising employment levels as well as Government schemes such as Help to Buy.”
The typical first time buyer paid £167,137 for their home during the first half of the year, putting 60 per cent of people above the £125,000 threshold at which Stamp Duty kicks in.
Unsurprisingly, there were significant regional variations, with first time buyers in London paying the most for their property at an average of £306,354.
This figure was more than £100,000 above those in the South East, which had the second highest purchase price at an average of £203,826.
The North was the least expensive region in which to get on to the housing ladder, with first-time buyers paying an average of £110,410 there, meaning 72 per cent of them did not have to pay any stamp duty.
People buying their first home in London had to save the most for a deposit at £76,435, while those in the North West put the least down at £16,532.
Mortgage lending rose by 17 per cent during June, but the pace at which it is increasing showed signs of slowing, figures revealed today.
A total of £17.5bn was advanced during the month, 4 per cent more than in May and 17 per cent above the level for June 2013, according to the Council of Mortgage Lenders.
But the group pointed out that while the year-on-year growth level was still strong, it was softer than the figures seen earlier in the year.
Lending rose by more than 40 per cent in both January and February compared with the same month of 2013 – more than double the increase seen in June.
Bob Pannell, CML chief economist, said: “The macro-prudential interventions announced by the Financial Policy Committee in late June are finely calibrated and precautionary, but could nevertheless reinforce April’s Mortgage Market Review in tipping the UK towards a more conservative lending environment.
“It is difficult to gauge the short-term direction for house purchase activity and mortgage lending more generally, given unknown regulatory impacts and uncertainty as to when the first in a series of interest rate increases will take place.”
Recent strong house price inflation has led to concerns that a bubble may be building up in the property market, particularly in London where annual growth hit a record 20.1 per cent in May.
The rises have left the average cost of a home in the UK standing at £260,311, according to Zoopla.
But commentators have been quick to point out that while the property market recovery has been strong in London and southern regions, it is only just beginning to take off in other areas of the country.
The Royal Institution of Chartered Surveyors has also said demand from potential buyers is beginning to moderate, while more properties are being put up for sale, helping to ease the previous mismatch between supply and demand.
Meanwhile, the Bank of England’s Trends in Lending survey showed a fall in the number of mortgages approved for house purchase during the three months to the end of May, amid reports of a slowdown in housing market activity.
It added that the introduction of the Mortgage Market Review may also have contributed to the drop as lenders introduced new processes and trained their staff.
There was also an increase in the cost of two-year fixed rate mortgages during the period on the back of speculation about when interest rates would start to rise.
The average rate charged on a two-year fixed rate deal with a loan to value (LTV) ratio of 75 per cent rose by 0.19 per cent during the three months, while the same mortgage with a 90 per cent LTV increased by 0.12 per cent.
The Bank said swap rates, upon which fixed rate mortgages are based, had risen by a similar amount during the three months.
It added that some major lenders expected mortgage rates to continue increasing during the rest of the year, partly due to rising swap rates.
Demand for mortgages from people buying a house increased “significantly” during the three months, and lenders expect this trend to continue going forward.
There was also a slight increase in mortgage availability during the period, particularly for people looking to borrow 90 per cent or more of their property’s value.
The average price of renting a property is currently £745 a month. But there is a huge variation in different parts of the country, with London costing £1,124 a month, while average rents in the East Midlands being almost half that amount at £575. What can a tenant rent around the country for £745?
1. Unfurnished two double bedroom flat in Manchester’s Stretford, with secure parking.
2. Modern three bedroom detached house in Warwickshire’s Rugby.
3. Two bedroom flat with driveway parking and communal gardens in Stafford’s Weston.
4. Unfurnished studio in a Grade II listed Regency building in Hove’s Palmeira Square.
5. A newly decorated two bedroom semi-detached house in Bristol’s Bradley Stoke.
6. Detached bungalow in York’s Appletree Village, with two double bedrooms, a single garage and maintained gardens.
7. Unfurnished two bedroom terrace house with new kitchen and bathroom in Chatham.