The number of first-time buyers reached a six and a half year high in March, as Help to Buy enabled more high loan-to-value lending, according to the latest First Time Buyer Tracker from Your Move and Reeds Rains, part of LSL Property Services.
There were 31,400 first-time buyer sales in March 2014 – the highest monthly figure since August 2007, and 60% higher than 12 months before, as first-time buyer activity returned to pre-recession territory.
Data from estate agency chains Your Move and Reeds Rains shows the average first-time buyer deposit fell 10% to £23,802 over the 12 months to March. It was the lowest first-time buyer deposit recorded in three years. The average deposit now represents just 66% of the average first-time buyer’s income, compared to 77% a year before.
David Brown, commercial director of LSL Property Services, said: “The number of first-time buyers has returned to a pre-recession high, just in time for the one year anniversary of Help to Buy. More first-time buyers are seizing the opportunity to have a helping hand from the Government in putting together a deposit. Help to Buy has allowed the bottom of the market to stay buoyant, despite property prices increasing.”
The average first-time buyer purchase price has increased 6% in the past year, equivalent to a jump of £7,781 since March 2013. But despite those price rises, mortgage repayments have remained static as a proportion of income over the last twelve months, aided by falling mortgage rates.
Even as prices rise, the first-time buyer market is continuing to thrive as high LTV lending grows as a proportion of overall lending, aided by Help to Buy.
The latest e.surv Mortgage Monitor showed high LTV loans accounted for one in six house purchase approvals in March, with 9,628 loans to borrowers with a deposit worth 15% or less of the total value of their property, 50% higher than in March 2013.
The average LTV of a first-time buyer was 83.5% in March, up 2.9 percentage points from 80.6% twelve months before, and the highest since October 2008.
Brown said: “The bank of Mum and Dad is no longer the only go-to cash reserve for aspiring home-owners. Parents have seen their savings diminished by inflation and low interest rates. The government is stepping in to fill that void and help first-time buyers struggling to save for a deposit to get onto the ladder.
“There is an added benefit too. Extending the equity loan scheme will encourage more first-time buyers to opt for new builds. This goes some way to guarantee future demand for home-builders, thus encouraging them to develop more new projects. Even so, the scale of the home-building revival must be up-scaled, in order to give the next generation of would-be first-time buyers a fair opportunity to buy their own home.”
In the capital, the average deposit for a first-time buyer was £67,955 – more than double the average across the UK (£30,046). However, this didn’t hold back first-timers in the capital. There were 12,700 first-time buyer sales in London in Q1 2014, the most of any region.
The cheapest region for first-time buyers was Northern Ireland. Here, the average first-time buyer purchase price was £90,816 in Q1 2014 – 42% lower than the average across the UK (£155,502).
Yorkshire & Humber was the cheapest region in terms of deposit size. The average first-time buyer deposit was £15,280 in Yorkshire & Humber in Q1 2014, half of the average across the UK (£30,046). Proportionally, the average first-time buyer deposit in Yorkshire & Humber was worth just 14% of the total property purchase price.