The number of first-time buyer house completions in the UK rose 7% year-on-year in August, even as concerns of rising interest rates and falling income grew, according to the latest First Time Buyer Opinion Barometer from Your Move and Reeds Rains.
There were 28,300 first-time buyer completions in August 2014, 7.2% more than a year ago. It was the third consecutive month in which first-time buyer completions topped 28,000. Compared to July, first-time buyer completions dipped 6.3%; however monthly volumes remained 9.3% above the average figure for this year to date (25,900).
The average purchase price for a first-time buyer property was £151,942 in August 2014, 3.5% higher than twelve months ago. Over the same period, the average first-time buyer mortgage climbed 5.9% to £124,828 – helped by an increase in higher LTV lending. The average first-time buyer deposit was £27,114 in August, 6.2% lower than in August 2013.
David Brown, commercial director of LSL Property Services, said: “First-time buyers remain keen to get a foot on the housing ladder and this is essential to keep the housing market moving. For seven years, a whole host of new buyers were unable to access the property market, as wages remained stagnant while the cost of living grew making saving for deposits difficult for many. But Help to Buy – and the whole host of other higher LTV options now being offered by lenders – have been helping repair the damage caused by the financial crisis, and providing a means for first-timers to get onto the ladder at long last.
“However, more could be done to help buyers step onto the property ladder – particularly in the expensive capital. Our antiquated stamp duty categories haven’t been updated in over a decade and desperately need to be revisited. The average price for a first property in London is well over £250,000, meaning most buyers are liable for a stamp duty bill of at least £7,500. For many borrowers who have already struggled to save for a deposit, that fee can be prohibitive. Stamp duty fees form too big an obstacle for many first-time buyers to navigate where price restricts choice.”
The latest e.surv Mortgage Monitor showed higher LTV lending continues growing in strength. There were 11,300 loans to borrowers with a deposit worth 15% or less of the total value of their property in August 2014 accounting for 17.8% of all house purchase lending – the highest proportion since October 2008.
In August 2014, 93% of tenants registered with Your Move and Reeds Rains wanted to become homeowners.
One in six (17%) of tenants expect to be able to buy by the end of 2014 and four in ten (41%) believe they will be able to buy within the next five years. A further 23% of tenants believe they will buy at some point in the future, but cannot pinpoint when.
Furthermore, 17% of tenants surveyed in August think they will never be able to afford to buy, almost double 9% a year ago.
There are concerns among first-time buyers over interest rate rises and falling income in particular. Interest rate rises pushing up mortgage repayments was named as the number one concern putting off prospective homebuyers from purchasing property by 15% of first-timers in August – compared to just 12% a year ago. Simultaneously, 11% of first-time buyers named worries over decreasing income as the biggest block to homeownership, more than double 5% a year ago.
Despite these concerns, difficulty in putting together a deposit remained the biggest obstacle to homeownership for prospective buyers, with 44% of tenants reporting that saving a deposit was the greatest factor preventing them from buying, compared to 46% twelve months ago. Stamp duty and other transactions costs were named as the number one concern preventing homeownership by 15% of homeowners – compared to 19% a year ago.
Brown said: “Initial signs of dissent among the Monetary Policy Committee hint that a base rate rise may happen in the New Year. The MMR regulations have been designed to make sure borrowers are primed and ready for this transition, as they should be well advised of the effect the base rate rise will have on their finances. But the eventual base rate rise is still a concern to borrowers, many of whom don’t think they’ll be able to afford to get onto the ladder if interest rates are higher. However any rate rises have been predicted to be small and the real impact on repayments if this is the case in reality will be negligible.”
In London, first-time buyers have to wait longer until their earnings are high enough, before getting onto the property ladder. The average London first-time buyer was 32 years old and earning £41,302 in August, whereas in the rest of the UK, the average first-time buyer was 29 years old and earning £32,274.
The average first-time buyer in London paid £272,183 for their property in the three months to August 2014, compared to £144,657 across the UK. London first-time buyers also had by far the largest deposits: the average London first-time buyer deposit was £71,309 in the three months to August, more than double the average deposit in the South East (£32,983) and four times larger than the average first-time buyer deposit in Northern Ireland (£15,835), which was the region home to the cheapest average first-time buyer deposit.
In Northern Ireland, the average first-time buyer purchase price climbed above £100,000 for the first time since the beginning of 2011. First-time buyer purchase prices also rose significantly in Scotland, where they climbed to £130,797.
