Posts tagged ‘first time buyers’
The number of people buying their first home has soared by nearly a third during the past year as lenders accept lower deposits, research showed today.
Around 146,600 first time buyers purchased a property in the six months to the end of June, 27 per cent more than in the same period of 2013, according to LSL Property Services.
The group said it was the highest number of first-time buyers during the first half of the year since 2007, before the financial crisis struck.
It attributed the surge in people getting on to the property ladder to a new willingness among lenders to advance mortgages to people with smaller deposits.
It said the average deposit put down by a first-time buyer was £24,530 in June, 18 per cent less than a year earlier and the fifth consecutive month in which it has been less than £25,000.
At the same time, typical property prices paid by first time buyers have remained broadly stable, rising by just 2.9 per cent to £119,743.
David Newnes, director of estate agents Your Move and Reeds Rains, part of LSL Property Services, said: “The bottom of the market continues to recover, even as activity further up the price bands is beginning to show signs of slowing down.
“Lenders have been more willing to lend to higher loan-to-value borrowers. Help to Buy has boosted confidence and with it demand among first-timers who have been carefully saving up for their deposit.”
But he warned that new loan-to-income caps announced by the Bank of England could have a “stifling effect” on first time buyers, adding that there would need to be careful interpretation of them to ensure they did not cut good buyers out of the market.
Around 26,500 people got on to the property ladder during June itself, 10.4 per cent more than a year earlier and the second consecutive month in which first time buyer numbers topped the 26,000 threshold.
But despite the growing number of first time buyers entering the market, the dream of home ownership still remains far off for many people.
In June, 93 per cent of tenants registered with Your Move and Reeds Rains wanted to become homeowners, but only 17 per cent expected to be able to buy a property within the next 12 months, and 14 per cent did not think they would ever be able to afford to buy one.
Financial help from the Bank of Mum and Dad remains a key factor in helping people to get on to the property ladder, with 39 per cent of first-time buyers in June receiving family help to build up their deposit.
A further 7 per cent put money they had inherited towards a deposit, while 4 per cent used a Government scheme, such as Help to Buy.
Only 45 per cent of first time buyers completely self-financed their property purchase during the month.
Meanwhile the Resolution Foundation warned that the number of people facing mortgage repayment problems could double by 2018 as interest rates rise.
It estimates that the number of households who had to spend more than a third of their post-tax income on mortgage repayments would rise to 2.3 million by 2018 from 1.1 million – the equivalent of one in four households with a mortgage.
The number of households spending more than half of their post-tax income on all forms of debt repayment, defined as being in debt peril, also looks set to double to 1.1 million.
The group called on policymakers to learn the lessons from the past and tighten lending criteria and reduce the UK economy’s dependence on debt.
It added that an “orderly and managed dismantling of the debt overhang” was needed, so that people who were lent money during looser credit conditions did not suffer affordability problems.
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.