UK first time buyers sales at their highest since the recession

The number of first time buyers in the UK reached their highest level in July since the recession, paying an average of £161,985, some 8.9% more than a year ago, according to the latest index.

There were 29,700 sales of homes to first time buyers, some 4.9% above June with demand judges to be rising to an expected interest rate rise in the New year and despite the fact that the average first time buyer now needs a deposit of £27,975.

July’s sales figure also represents a 28% rise on April 2015, amounting to a 6,500 increase over the last three months, the latest First Time Buyer Tracker index from Your Move and Reeds Rains also shows.

Average deposits have increased by 10% compared with July 2014’s figure of £25,429 which in cash terms, this equates to a rise of £2,546. The cost of a deposit as a proportion of a first time buyer’s average income reached 71.6% in July, up 3.1% in one month alone and rising 5.4% from a year ago.

Equally, the average first time buyer Loan to Value ratio (LTV), which represents the proportional size of an individual’s loan compared to the value of the property they are buying, is steadily dropping. This means first time buyers are having to pay more up front, in the form of larger deposits.

July’s rate of 82.7% represents a 0.5% decrease on LTVs in June and a 0.2% decrease on a year ago, as the size of the average deposit rises. A similar picture emerges in the latest Mortgage Monitor from e.surv. The data revealed a decline in the number of small deposit loans given approval in July, dropping 5.9% compared to June and 7.1% compared to July 2014.

According to Adrian Gill, director of estate agents Your Move and Reeds Rains, the post general election bounce has given way to a more stable optimism as first time buyers realise that the property market is at no immediate risk of being tampered with by the government.

‘Incentives attractive to first time buyers such as the Help to Buy schemes are running along steadily, while further low cost housing development is being encouraged to entice more people onto the ladder,’ he said.

‘This month’s particularly high transaction rate is also partially due to expectations that the Bank of England may announce a rate rise sooner rather than later. The thought of months of rock-bottom mortgage rates being brought to an end is encouraging many wavering first time buyers to jump on the property ladder before repayment costs shoot up,’ he pointed out.

‘Some may have held back briefly when considering the rising deposit costs. But real wages have been growing too, and first time buyers are able to shoulder the short term burden of a slightly higher deposit to spare the risk of losing out on a good mortgage deal,’ he added.

Despite some lenders starting to withdraw their cheapest deals, the average first time buyer mortgage rate continues to fall, but at an increasingly slow pace. The average rate fell 0.75% between July 2014 and July 2015, from 4.19% to 3.44%. However, it fell 0.12% over the last three months and only 0.02% between June and July of this year.

‘So long as the economy continues on its upward trajectory and the aspiration for home ownership remains strong, property prices can only increase. While the higher deposit and mortgage costs this brings may be a bother for some, taking a longer view, it’s a sign of a vibrant and dynamic property market,’ said Gill.

‘What may be more concerning for first time buyers is that average mortgage rates may be on the verge of climbing back up. But first time buyers shouldn’t worry. When a rate rise does come it is likely to be slight and gradual so home ownership will by no means suddenly become a costly dream. Instead, it will remain an affordable reality for those first time buyers with the drive and determination to make it so,’ he added.

The research also reveals regional differences in the first time buyer market. London is the most expensive place for first time buyers, with average first time buyer house prices standing at £274,868 in the three months to July 2015.

The second most expensive place for first time buyers was the South East, where the average house price over the same period was £201,652. Nationally, the average price for a first time home stood at £149,713 in the three months to July 2015.

The North East and Northern Ireland are the least expensive regions for first time buyer properties, with average prices standing at £109,240 and £106,176 respectively.

On average, Londoners put down a deposit of £66,876 in the three months to July 2015, more than five times the size of the average first time buyer deposit in the North East which was £17,659. The East of England is the region with the second largest deposit, coming in at an average of £45,798 in the three months to July 2015.