First time buyer numbers fell in December by 1,300 on a monthly basis, down 4.7%, as the traditional slowdown hit the UK property market but over the course of 2015, the longer term outlook remains healthy for first time buyers, with numbers up by 1.1% between December 2014 and December 2015.
The data from the Your Move and Reed Rains first time buyer tracker report also shows that first time buyers find cheaper homes with smaller deposits and secure more affordable mortgages.
Also, the average mortgage rate remains at a rock bottom level, with lenders buoyed by recent news that the Bank of England does not intend to raise interest rates for the foreseeable future.
According to Adrian Gill, director of estate agents Your Move and Reeds Rains, first time buyers have been buoyed by a positive economic climate and a range of Government incentives such as the reduction of Stamp Duty on lower priced properties, designed to lessen at least the immediate costs of home ownership.
‘They increasingly came into their stride as 2015 has progressed. Some of the credit for this revival in activity should also go to first time buyers themselves. Over the course of the year they have toughened up their act and sought to get the best property they can at the best price and it’s a skill that will serve this group well as they head into 2016,’ said Gill.
The cost of an average first time buyer home fell on a monthly basis in December from £153,275 to £152,470, a drop of 0.5%. However, over the course of the year, the average purchase price rose by 3.8%, representing an increase of £5,518 between December 2014 and December 2015.
In addition, December saw a dip in the costs of getting on the property ladder. The average deposit put down by a first time buyer in December fell by 0.5% month on month to £25,292. This is indicative of a broader trend of deposit costs falling over the course of the year, with the average cost of a deposit dropping by £2,151 or 7.8% between December 2014 and December 2015.
The decline in the burden of the average deposit on a first time buyer is reflected by the fact the proportion of an average first-time buyer’s income that is eaten up by the deposit fell from 64.6% in November to 64.3% in December. Between December 2014 and December 2015 the proportion fell by 6.8%.
First time buyers in December also benefitted from a reduction in the regular burden placed on their finances by mortgage repayments. In November 19.3% of a first time buyer’s average income was consumed by monthly mortgage payments, by December this had fallen to 19%, the second lowest figure on record.
Meanwhile, the average loan to value ratio stayed static at 84.4% between November and December. However, over the course of the year LTV ratios steadily increased, rising by one percentage point between December 2014 and December 2015, meaning first time buyers have been able to progressively borrow more against the value of their desired property.
On a monthly basis, the total number of higher LTV loan approvals dipped 3.1%, according to the latest Mortgage Monitor from e.surv. However, year on year the total number of such loans jumped by 31.9%. Equally, the average first time buyer mortgage rate stood at 3.27% in December, 0.1% down on the previous month and the lowest mortgage rate on record.
‘December offered an opportune time for first time buyers hoping to get on the ladder. First time buyer home values stalled in their upward advance. But, on a long term basis, values increasing steadily indicate there’s more work to be done, by both Government and house builders, before that can be turned into a long term improvement,’ said Gill.
‘It’s also pleasing to see a decline in the proportion of first time buyer monthly income consumed by monthly mortgage repayments. This is a sign both that first time buyers are enjoying sustained real term increases to their salaries and that they are not burdening themselves with hefty mortgages for properties they will struggle to afford,’ he explained.
‘Moreover, the Bank of England allaying fears of any imminent rate rise has succeeded in keeping mortgage rates low. This is yet more welcome news for first time buyers, for whom every pound in their pay packet counts,’ he pointed out.
‘These are favourable conditions which first time buyers will hopefully still be able to enjoy early on in 2016, provided they can shake off the last of the festive fuzz and focus their minds once more on setting foot on the property ladder,’ he added.
The report also shows that London remains the priciest location for first time buyers. The average value of a first time buyer property in the capital climbed to £343,686 in the three months to December 2015. The South East is the second most expensive, with average first time buyer house prices there hitting £211,807 over the same period.
Conversely, the North East and Northern Ireland rank as the least expensive regions for first time buyer properties. Average first time buyer property values stand at £108,419 in the North East and £92,665 in Northern Ireland. Nationally, the average price for a first home stood at £156,276 in the three months to December 2015.
On average, Londoners put down by far the largest deposit of any region in the three months to December 2015, paying out £83,094, more than five times the size of the average first time buyer deposit in Northern Ireland at £15,561.
The second largest deposits are paid by first time buyers in the East of England. Buyers there paid an average of £47,960 to secure their first home in the three months to December 2015, which equated to almost double the national average of £24,621.
Gill pointed out that in December there was no let-up to the price gap between London and the rest of the UK, with average property values in the capital well over double the UK average.
‘This is a reflection of the continuing popularity of the area among a combination of young professionals, successful families and investors, all of whom are willing to pay heavily to enjoy the culture, history and sheer buzz of London,’ he said.
‘However, London is not the whole story. The East of England is continuing to enjoy rapid rises in property prices, as workers seeking a quieter life than what the capital can offer migrate to places such as Norwich and Cambridge, successful cities combining history with established tech credentials,’ he added.
