The number of first-time buyers grew 8% in the month to April and 47% year-on-year, despite the introduction of MMR, according to the latest First Time Buyer Opinion Barometer from Your Move and Reeds Rains, part of LSL Property Services.
There were 26,300 first-time buyer transactions in April 2014, up 8% from 24,400 in March 2014.
Compared to last year, the number of first-time buyers was 47% higher in April 2014, with the revival in new buyers aided by the Help to Buy Scheme, which has facilitated more high loan-to-value lending. First-time buyer deposits fell 7.5% year-on-year to £24,618 in April. It was equivalent to a drop of over £2,000 from £26,623 in April 2013.
One in 10 first time buyers (11%) say the financial assistance of Government schemes such as Help to Buy enabled them to get their foot on the property ladder.
David Brown, commercial director of LSL Property Services, said: “The tightening of mortgage criteria hasn’t dampened the appetite for first-time-buyer property. Many more new buyers are making the jump onto the property ladder, while deposit requirements – and mortgage rates – remain relatively low. Many buyers are locking into fix-rate deals that promise low repayments for the next few years, offers that may not be around much longer.
“With real wage growth around the corner, and expectation that prices will continue to rise, getting on the property ladder is not only becoming more realistic, but more of a priority. The prospect of the end of Help to Buy may add further fuel to the momentum in the market.”
First-time buyer purchase prices rose 10% over the year to April 2014, reaching an average of £149,655. The average first-time buyer mortgage size has outpaced that growth (+15% year-on-year), enabled by greater high loan-to-value lending. In April, first-time buyers took out a mortgage worth £125,037 on average
The report claimed first-time buyers in London are feeling the brunt of the impact of the Mortgage Market Review and the tighter lending criteria. Nearly a third of first-time buyers in London say they have found it more difficult to get a mortgage since the MMR regulations came into force. But across the rest of the UK, only one in 5 found that the new procedures have impacted their application process. The majority of those surveyed (53%) think that the new MMR regulations are a positive step for the market.
Brown added: “The new regulations may mean more rigorous testing for new buyers, but they will help ensure they are better informed about such an important financial decision. And with talk of an interest rate rise ongoing, it is vital that this possibility is taken into account when considering the application of new buyers.
“Greater stress-testing and questioning may sometimes feel invasive, but it could prevent greater heartbreak in the long-run. The new regulations will help ensure first-time buyers are clued up as to how their personal finances will perform within a more testing economic arena.”