Posts tagged ‘first time buyers’
The average property price paid by first time buyers hit a two-year high in September, as starter homes outperformed the rest of the market, research showed today.
The typical cost of a first home soared by 4.1 per cent during the month to stand at £160,218, according to estate agent haart.
But house prices eased across the wider property market as the supply of homes for sale increased, but demand fell.
There were 2.8 per cent more homes put on the market during September than in the same month of 2013, the fourth consecutive month during which supply has increased on an annual basis.
At the same time, the number of new buyers registering with estate agents fell by 6.6 per cent, also the fourth month in a row in which demand has eased year-on-year.
The change in market dynamics led to the average cost of a British home dipping by 1.1 per cent to £203,135, while in London prices dropped by 3.3 per cent to stand at £507,967.
But house price gains remained robust on an annual basis, with prices 6.9 per cent higher than they were a year ago across Britain as a whole, while in London they were a massive 19.8 per cent up.
Despite the easing in the mismatch between supply and demand, competition for homes remained intense, with an average of 10 buyers chasing every home for sale, rising to 16 potential buyers per property in London.
Paul Smith, chief executive of haart, said: “Although our data shows a small slowdown in house price growth on a monthly basis, this must be taken in the wider market context.
“Good mortgage deals are still very much on the table and interest rates aren’t going up for the foreseeable future.
“We have 10 buyers chasing every new property instruction UK-wide, so sellers shouldn’t start sneezing yet. The run up to Christmas has already begun and the market remains strong.”
Property sales increased by 1.8 per cent during the month, to stand 7.2 per cent higher than in September 2013.
But the number of first time buyers registering with estate agents fell by 6.4 per cent compared with a year ago.
People taking their first step on the property ladder put down average deposits of £34,550 during the month, while they borrowed an average of £125,668.
On a brighter note, this group accounted for 44.7 per cent of all mortgages advanced in September, slightly up on 41.1 per cent 12 months earlier.
Today’s figures add to growing evidence that the booming property market is beginning to cool.
Nationwide Building Society said house prices dipped by 0.2 per cent in September, while Halifax said annual house price inflation may have peaked at 10 per cent.
Property is significantly more affordable than at the start of the financial crisis in all areas of the country except London, research showed today.
Low interest rates have ensured it is easier for people to get on to the property ladder or trade up it in all regions outside of the capital, despite recent strong house price gains and stagnant wage growth, according to estate agent Hamptons International.
The group has created an affordability index, which not only looks at the house price to earnings ratio, but also factors in changes to the cost of living and mortgage rates.
The group said the amount of income families had left after paying for essential items, such as food and utilities, had fallen by 6 per cent or £60 a month since the start of the financial crisis in 2008.
This drop was largely due to the fact that post-tax income for a full-time working couple had increased by just 9 per cent in the past five years, but spending on essentials had soared by 28 per cent.
But despite recent house price rises, the average cost of a home is still 5 per cent below its pre-crisis peak, while low interest rates mean mortgage repayments account for a significantly lower proportion of people’s income than in 2008.
Fionnuala Earley, director of research at Hamptons International, said: “Our analysis shows that ability to buy across the country, but excluding London, has improved since the start of the recession when both house prices and interest rates began falling.
“London is the stand out exception. Here ability to buy is now worse than it was before the crash.”
Northern regions have seen the biggest improvement in the affordability of property since the financial crisis started.
Hamptons International estimates that affordability for first time buyers has increased by 305 per cent in Wales since 2008, while it is 212 per cent better in the West Midlands and 190 per cent better in Scotland.
But the group admits these figures do not take into account the large deposits people currently need in order to obtain a mortgage.
Other groups have not fared as well, with families with young children seeing the least benefit.
Although their ability to afford property has only deteriorated in London, the improvements seen in other regions have been far more muted, increasing by an average of just 27 per cent across Great Britain as a whole.
Looking ahead, as the economy improves, the group expects wages to rise in real terms, increasing people’s ability to buy a property, but it added that some of the improvement would be offset by higher interest rates.
Meanwhile, research carried out by the Daily Mail found that foreign buyers, particular Chinese and Russian investors, were turning their attention to properties outside of London as they looked to cash in on Britain’s strong housing market.
It said houses in South Wales and Weston-super-Mare, and flats in Manchester, Liverpool and Sheffield were being offered at foreign investment fairs and on estate agents’ websites in China and Russia.
The number of homes bought with cash had increased by over a fifth in the past year, according to estate agent Savills, and many of these purchasers are thought to be wealthy foreign buyers.
But there are fears that an influx of foreign investors will push up prices for first time buyers and families outside of the capital, which has recently seen strong growth in property values, largely due to demand from overseas buyers.
Mortgage advances to people buying a house fell for the first time in five months during August in a further sign that the property market is slowing down, figures revealed today.
A total of 65,400 loans were advanced to homebuyers in August, 3 per cent less than in July, according to the Council of Mortgage Lenders.
But despite the month-on-month dip, lending levels were still 8 per cent higher by number and 19 per cent higher by value than in the same month of 2013, making it the best August for house purchase lending since 2007.
The drop was most marked among first time buyers, with 28,900 mortgages advanced to people buying their first home in August, 4 per cent less than in July andthe first fall since January this year.
Affordability for first time buyers is becoming increasingly stretched on the back of recent strong house price gains, with the average person getting on to the property ladder borrowing 3.42 times their income, up from 3.37 times their pay 12 months ago.
The deterioration in affordability came despite the fact that the average amount first time buyers borrowed dropped to £126,198 in August, down from £127,500 in July.
But record low interest rates ensured repayments remained affordable, with first time buyers typically spending 19.7 per cent of their total pay on capital and interest mortgage payments, still significantly below the recent peak of 24.8 per cent reached in December 2007.
There was also a dip in remortgage activity during the month, although this is not unusual for the time of year.
There were 4 per cent fewer loans advanced to people moving to a new deal compared with July, while there was also an 11 per cent fall year-on-year.
Paul Smee, director general of the CML, said: “The lending climate had a glass half full, glass half empty feel about it in August.
“On the one hand it saw a decline in all lending types month-on-month, which would suggest a levelling off of the market.
“Yet, on the other hand, we saw the highest August house purchase lending levels since 2007, and the recent Bank of England Credit Conditions Survey expects an upward trend in remortgaging in the final months of the year.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said it was “curious” that remortgaging levels remained so weak despite the historically cheap rates currently available.
He said: “As these are not proving enough of a draw, it is unlikely that numbers will flock to remortgage until an interest rate rise is imminent.
“Some borrowers may be concerned about their ability to remortgage given the new affordability criteria and may find themselves stuck on their lender’s standard variable rate when rates do start to rise.”
The data came as the Royal Institution of Chartered Surveyors said the steam appeared to be coming out of the British property market as demand from potential buyers fell for the third month running, while the number of homes on the market remained broadly flat.
The group said house price momentum slowed to its lowest level since June 2013 in September, with surveyors predicting house prices will rise by 2.1 per cent during the coming year.
First time buyers could save more than £1,300 a year by purchasing a home rather than renting one, research showed today.
It typically costs first time buyers just under £110 a month less to live in a three bedroom property they own than they would have to pay to rent a similar home, saving them a total of £1,316 a year, according to Halifax.
The group said the monthly cost of living in a three bedroom property you owned added up to around £677, including mortgage repayments, maintenance costs and insurance, compared with average rent of £787 on a comparable property.
The savings that can be made by buying rather than renting are a considerable turnaround compared with five years ago, when buying a home typically cost £37 a month more than renting one.
The fall in the associated cost of buying a property has been driven by the decline in mortgage rates seen since 2009.
The average interest rate paid by a first time buyer borrowing 90 per cent of their home’s value had dropped to 3.09 per cent at the end of June, down from 4.92 per cent in June 2009, reducing typical monthly payments by £57.
Halifax also pointed out that although the cost of buying a home had actually increased by £25 a month during the past year, this had been more than offset by a £42 a month jump in rents.
It added that the fact that it was now cheaper to buy a home than rent one, may have contributed to a 29 per cent jump in first time buyer numbers during the past year.
Buying a property is cheaper than renting one in all regions of the UK apart from the East Midlands, where it is still £15 a month cheaper to rent, and East Anglia, where being a tenant costs £9 a month less.
The biggest savings that can be made by being a homeowner are in London and the West Midlands, where first time buyers could save an average of £82 a month by living in their own home rather than a landlord’s, followed by Wales at £45 a month.
Craig McKinlay, mortgage director at Halifax said: “It is clearly encouraging that since 2009 there has been a significant decline in the cost of buying a home for those for those trying to get on the housing ladder.
“The improvement is due to a combination of lower mortgage rates and rising private rents. Buying costs have been remarkably stable for much of the past five years making home ownership a more attractive option.
“With greater availability of mortgages that require smaller deposits, the property ladder has also become even more accessible for those who can afford the monthly costs of owning but had previously not been able to save the necessary deposit.”
The number of people taking their first step on to the property ladder hit a seven-year high in July, research showed today.
A total of 30,000 first time buyers bought a home during the month, the highest level since August 2007 and 25 per cent more than in July 2013, according to LSL Property Services.
There was also a 10 per cent drop in the amount first time buyers put down, with deposits falling to £26,642, £3,000 less than a year earlier.
The Government’s Help to Buy scheme continued to have an impact on the proportion of a property’s value that lenders were prepared to advance, with average loan to value ratios rising to 82.9 per cent, compared with 79.5 per cent in July 2013.
But it was not all good news for people taking their first step on to the property ladder, with the typical mortgage rate they secured rising for the fourth consecutive month, increasing to 4.19 per cent, up from 3.99 per cent in March.
This higher rate also led to the size of mortgage repayments as a proportion of income growing to 22.6 per cent, compared with 20.2 per cent a year ago.
People typically spent £155,844 on their first home, 8 per cent more than the average amount paid a year earlier.
Despite the drop in the average deposit put down by first time buyers, people still needed to save the equivalent of 72 per cent of their annual pay towards their first home.
But this figure was down from 82.6 per cent of earnings in July 2013, also reflecting the fact that the average salary of people buying their first home had risen to £37,000 from £35,843 a year earlier.
David Newnes, director of estate agents Your Move and Reeds Rains, part of LSL Property Services, said: “The first-time buyer market is still active, even as the wider property market is starting to show signs of cooling down.
“As the economic recovery gathers momentum, more buyers are finding themselves in a position where they can afford to own their own home.”
He said a whole generation of first-time buyers had found themselves stuck on the side-lines of the property market as the economy recovered from the recession and real wages fell.
But he added: “The recent increase in high loan-to-value lending options – enabled by Help to Buy – has allowed them a shot at getting on the ladder at long last, and the number of first time buyers has climbed to a seven year high.”
Strong house price growth seen in recent months has pushed the average price paid for a first home above the £150,000 barrier in London, the South East, East, South West and Wales.
Unsurprisingly, London was the most expensive place in which to buy a first property at an average of £251,061, followed by the South East at £194,955.
At the other end of the spectrum, Northern Ireland and Yorkshire and Humber had the cheapest properties at an average of £89,470 and £103,741 respectively.
First time buyers in London typically saved £62,253 for a deposit, nearly six times more than the £10,710 put down by people getting on to the property ladder in the North East.