Monthly mortgage costs as a proportion of income are now below the long term average and 40% of local authorities are affordable for first time buyers, a sevenfold increase on 2007, the report shows. It also reveals that 95% of first time purchases are now exempt from stamp duty.
The proportion of disposable earnings devoted to mortgage payments by a potential new first time buyer stood at 27% in September 2010, the lowest since December 1998 and almost half of the peak level of 50% in September 2007. This significant improvement in affordability over the past three years has been mainly driven by a combination of lower house prices and declining mortgage rates, the lender says.
In 2010, 40% of local authority districts (LAD) across the UK were affordable for the average first time purchaser, a considerable improvement from 2007, when only 6% of areas were affordable, although this is less than half the proportion of the affordable LADs in 2000 (82%).
The North East is the most affordable region in the UK for first time buyers, 83% of local authority districts here are affordable to FTBs, more than in any other region. The report also shows that only 5% of first time buyers paid stamp duty between April and November 2010 as a result of the temporary increase in the stamp duty threshold for first time buyers from £125,000 to £250,000 announced in March.
Nationally, 39% of home purchases made by FTBs have benefitted from the increased allowance. First time buyers in the South East have benefited most from the change, with almost three quarters, 73%, of first time buyers in the region not paying stamp duty due to the increase.
‘The noughties were a difficult period for many looking to get onto the property ladder. The substantial rise in house prices over much of the decade prevented many potential first time buyers from entering the market, however, affordability has improved significantly over the past three years,’ said Martin Ellis, housing economist at Halifax.
‘Whilst the tightening in lending criteria experienced across the mortgage industry since the onset of the credit crunch in 2007 deterred first time buyers from trying to secure mortgage finance, there are now encouraging signs of a modest improvement in mortgage availability,’ he added.
