First time buyer purchase prices drop in December

Between November and December, the average price at which a first-time buyer bought a house fell from £153,275 to £152,470 – a drop of 0.5%, or £805. 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 ladder. The average deposit put down by a first-time buyer in December fell by 0.5% – or £117 – on a month-on-month basis to stand at £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 (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 percentage points.

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 (the lowest being 18.9% in August 2015).  

Meanwhile, the average loan to value ratio stayed static – at 84.4% – between November and December. However, over the course of 2015 LTV ratios have steadily ticked up, 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.

First-Time Buyer Affordability

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, from a year-on-year basis perspective, the total number of such loans jumped by 31.9%. Equally, the average first-time buyer mortgage rate stood at 3.27% in December – representing both a 0.1 percentage point dip on the previous month and the lowest mortgage rate on record.

Adrian Gill, director of estate agents Your Move and Reeds Rains, had this to say: “For those willing to put Christmas concerns and festive fun to one side, December offered an opportune time for first-time buyers hoping to get on the ladder and not break the bank. 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 short-term flash can be turned into a long-term improvement.

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. Moreover, the Bank of England allaying fears in December – and in January – 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.

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.”