Posts tagged ‘first time buyers’
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.
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.
If you want to buy a home, you might think it’s a good time to step on the housing ladder – interest rates are at a record low although they may rise in the future, unemployment’s falling and summer’s on the way at last.
Not only that, but traditionally property’s been seen as a good investment, and all you need to do is save a deposit and be able to pay your mortgage, right? Wrong. New rules require lenders to ensure borrowers can afford to meet their initial and on-going mortgage payments on time, and ensure they don’t get into financial difficulty running and maintaining their new home. It also means making sure they could manage if interest rates were to rise.
Time to buy?
The Bank of England Bank Rate is currently 0.5 per cent – a record low, meaning there could be great mortgage deals up for grabs. Of course you should remember to consider any arrangement or products fees when choosing your mortgage. If you add them to the mortgage it’ll mean paying interest on them for the entire term of the loan, so it makes financial sense to pay those fees separately if you can.
Right now, variable mortgage rate deals of around 2 per cent are available to individuals with a good credit record and a 20 per cent deposit to put down towards a property. So far so good, but with the new rules on mortgage lending taking effect on April 26, borrowers will also assess the impact of foreseeable changes in circumstances, such as if you’re expecting to be made redundant or are planning to start a family.
According to Money Advice Service research, the average first-time buyer is paying 3.4 per cent interest on their mortgage payments – around 3 per cent above the Bank of England rate. This is good news for many potential home-buyers, yet there is always the chance that interest rates may rise. To safeguard against this the new rules will also assess your ability to meet mortgage payments in the event that interest rates rise in the future.
Can you afford to buy?
Money Advice Service research also revealed three in four new homeowners overstretched their finances to get on the housing ladder. When you consider that over the past 18 years the Bank of England Bank Rate has fluctuated from a high of more than 7 per cent down to its current rate of 0.5 per cent, a stress test against shifts in the interest rate makes sense. Here’s a typical example – the average first-time buyer will have a mortgage of £140,800 and be making monthly payments of £749. For these people a 2 per cent rise would result in an increase of £171 a month on top of their existing mortgage payments.
If you are thinking about buying a home, it’s essential to consider all the key costs. Using a budget planner will help you plan your finances and cope with any unexpected costs.
All information accurate at time of publication
This article is provided by the Money Advice Service.
The attitude of young people towards renting is changing as many find themselves priced out of the property market, a study showed today.
There has been a marked shift in the opinions of 20 to 45 year olds towards homeownership, with many now accepting that renting enables them to live in a property they would either not be able to afford to buy or would have to make years’ of sacrifices to do so, according to Halifax.
The trend represents a marked shift from when the research was first carried out in 2011, when young people wanted to buy a home, but either could not afford to do so or dared not try to for fear of being rejected by mortgage lenders.
But the latest research found that one in five 23 to 27 year olds claim they have no desire to own a home, while 46 per cent think Britain is becoming more like Europe, where renting is the norm.
Young people are also increasingly unwilling to make the sacrifices necessary to get on to the property ladder.
The study found that 86 per cent of potential homeowners refused to sacrifice the quality of accommodation they currently lived in to help them save more towards a deposit.
At the same time, 54 per cent were not prepared to make other sacrifices to get on to the property ladder, and 57 per cent would not compromise on the quality of the first home they bought.
Craig McKinlay, mortgages director at Halifax, said: “With attitudes softening towards the social implications of renting, and the number of people who say they will never own a property increasing, we may be heading towards the point where the aspiration to own a nice home will be replaced by the aspiration simply to live in one.
“It seems that people are now beginning to accept a lifetime of renting and this would not only change the way the property ladder looks in the future, it could even bring into question whether or not it will exist at all for some people.”
But 40 per cent of people still said they did not want to raise children in a rented property, and 51 per cent worried that renting would have a negative impact on their retirement, although both figures were lower than last year.
Halifax also pointed out that the average cost of renting a home in the UK was now £1,488 a year more than owning one.
It added that the availability of 95 per cent mortgages had increased significantly during the past year, while schemes such as the Government’s Help to Buy should make it easier for people to get on to the property ladder.
Mr McKinlay said: “Researching the market and accessing the support that is available for first-time buyers could make a real difference in realising the dream of owning your own home.”
The Office for National Statistics also recently reported that house prices in the UK had reached a new record high.
Halifax questioned 8,026 20 to 45 year olds and 1,005 parents online between February 14 and 23.