There were an estimated 120,000 first time buyers during January to June 2013, up from 101,000 in the first six months of 2012, the highest total for the first six months of the year since 2007 when it was181,500.
This continues the trend seen last year when there was a 13% increase in the number of first time buyers between 2011 and 2012.
The latest research also shows that first time buyer numbers rose by more than the total number of house purchasers, increasing their share of the home purchase market from 40% in the first half of 2012 to 44% in the same period this year. This was the highest proportion since 2000.
Mortgage affordability has also improved significantly in recent years. The proportion of disposable earnings devoted to mortgage payments by first time buyers stood at 27% in the second quarter of 2013, nearly half of the peak level of 50% in the third quarter of 2007 and comfortably below the long term average of 36%.
‘The increased availability and reduced pricing of higher loan to value mortgages introduced over the past year or so have clearly contributed to the number of first time buyers rising to a six year high. Government schemes, such as New Buy and Help to Buy, are also enabling more first time buyers to enter the market,’ said Craig McKinlay, mortgages director at the Halifax.
‘The significant increase in first time buyers is encouraging, although the number of those buying their first home still remains low by recent historical standards. While conditions remain difficult, with problems raising the necessary deposit and concerns over the economic climate preventing people from entering the market, we remain committed to continuing to offer support designed specifically for first time buyers, ensuring even more people can take their first steps onto the property ladder,’ he added.
The research also shows that house prices paid by first time buyers are still above the long term average when compared with average earnings. Despite the improvements in mortgage affordability the average price paid in the second quarter of 2013 was 4.26 times average gross annual earnings. This compares with an average of 3.23 over the past 30 years.
The relatively high level of prices in relation to earnings, together with the requirement for first time buyers to put down larger deposits in recent years, are key factors behind the longer term decline in home ownership amongst the young, says the Halifax.
Higher prices mean that more first time buyers are paying stamp duty. Some 51% of all first time buyer purchases in the first half of 2013 were above the £125,000 stamp duty threshold. This is up from 44% a year earlier.
Within these totals, there are considerable regional differences with the 97% of first time buyers in London buying homes above the £125,000 threshold. Indeed, more than one in three, 37%, of first time buyers in the capital paid more than £250,000, resulting in them being liable to duties of more than 1%. This is a far higher proportion than anywhere else in the country.
Seven of the 10 most affordable local authority districts (LADs) for a first time buyer are in Scotland. Copeland in the North West of England, however, is the most affordable in the UK with an average property price of £89,022 that is 2.44 times local average gross annual earnings.
Eight of the 10 most affordable LADs for a first time buyer in England and Wales are in northern England with the other two in Wales. Rossendale in the North West is the most affordable after Copeland with an average property price of £88,248 that is 2.96 times local average gross annual earnings.
Nine of the 10 least affordable LADs are in London. The least affordable is Camden where the average first time buyer property price of £480,457 is 9.18 times gross average earnings in the area.
Nationally, the average first time buyer deposit in the second quarter of 2013 was £26,859, some 4% or £1,176 lower than in the second quarter of 2012 when it was £28,035, but £8,945 higher than in the second quarter of 2007 when it was £17,914.
The average deposit, as a proportion of the purchase price, increased from 10% in 2007 to 20% in 2011 and 2012. This proportion declined slightly in the second quarter of 2013 to an estimated 18%, indicating greater mortgage availability at high loan to value (LTV) ratios.
First time buyers in Greater London put down the largest average deposit, at £60,747, which is £47,221 more than the average deposit of a first time buyer in the North at £13,526.
The average price paid by a first time buyer is highest in Greater London at £264,118, more than two and a half times that in the North at £104,043 where the average price paid by a first time buyer is the lowest.
The average age of a first time buyer is 30 years old, up from 29 in 2011. Regionally, the average age of a first time buyer is highest in London at 32 years old. The average age is lowest in Yorkshire and the Humber, at 28 years old.
There has been a significant increase in the proportion of first time buyers receiving financial help in recent years. The Council of Mortgage Lenders estimate that around two thirds, 64%, of first time buyers had financial assistance in 2012 compared with significantly less than four in 10 before the financial crisis.
