Are FTB costs starting to tick up?

Are FTB costs starting to tick up?

The costs for buyers of owning their first home have lightened over the past twelve months, but there are signs that low stock and rising rates could put this to an end in 2016.

The average price at which buyers are purchasing their first home fell from £155,745 in November 2014 to £148,385 in November 2015, representing an annual price drop of 4.7% – or £7,360. November 2015 also marked the first time that the average purchase price for a first-time buyer home has fallen, on an annual basis, since March 2013.

First-Time Buyer Affordability

Average deposit

Deposit as proportion of income

Average mortgage rate

Mortgage repayment as proportion of income

November 2015

       £24,598

62.5%

3.37%

18.6%

October 2015

       £25,792

65.6%

3.34%

19.1%

1 month change

        -4.6%

-3.1

+0.03

-0.5

3 month change

        -7.7%

-4.8

+0.02

-0.3

1 year change

        -4.2%

-4.8

-0.55

-1.7

This purchase price drop for first-time buyer homes stands in contrast to the annual trend for the overall property market. The latest LSL Acadata House Price Index reveals that, across England and Wales, the average value of all property rose by 6.0% – or £16,446 – and now stands at £290,640.

Deposit costs have also fallen. In November 2015 the average deposit for someone looking to buy their first home stood at £24,598 – a drop of 4.2%, or £1,097, from November 2014, when the figure stood at £25,665. Alongside this, the proportion of an average first-time buyer’s income which is consumed by the deposit has dropped – from 67.3% in November 2014 to 62.5% a year later.

First-time buyers are experiencing a largely brighter picture when it comes to mortgages. The average loan-to value rate on a first-time buyer mortgage has climbed between November 2014 and November 2015 – from 82.8% to 83.4% – meaning that first-time buyers need less up-front capital to make their dreams of homeownership a reality. Over the same period, the total number of high LTV loans has jumped by 43.7%, according to the latest Mortgage Monitor from e.surv.

However, despite the average mortgage rate for first-time buyers falling between November 2014 and November 2015 from 3.92% to 3.37%, there have been more recent signs that mortgage rates for FTBs are beginning to tick up. November 2015’s average mortgage rate represents a 0.02% percentage point increase on August and a 0.03 percentage point increase on October, meaning that first-time buyers will be, on average, shelling out more – albeit a small amount more – to pay their monthly mortgage interest.


Adrian Gill,  director of estate agents Your Move and Reeds Rains, believes that a mixture of luck and pluck have seen costs fall across the board for first-time buyers this year:

"Rising real-terms wages as economic conditions improve have certainly been instrumental in helping those setting foot onto the property ladder devote less of their salary to mortgage payments and deposit costs. These were obstacles that were previously holding many back from taking the plunge and buying their first home. Equally, a more fluid mortgage market has given many first-time buyers the chance to own a home off the back of a mortgage that two or three years ago they could only dream of obtaining.

But first-time buyers are not just passive recipients of success – they have played their part in bringing their homeownership costs down. The sizeable fall in the average purchase price for a first-time buyer property is largely due to property hunters toughening up and driving hard bargains to get the home they want for the price they want. The question going into 2016 will be whether first-time buyers can continue playing hard ball with a smaller housing stock, as well as contend with less favourable mortgage deals as the Bank of England creeps ever closer to that long-awaited interest rate rise.”

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