The data from Your Move & Reeds Rains revealed that during April 32,300 first-time buyer transactions were completed. This equates to an improvement of 14.9% compared to 28,100 in March and 50.9% stronger than the 21,400 seen in January 2016. Compared to a year ago, completed first-time buyer sales have grown 37.4%.
Adrian Gill, director of Your Move and Reeds Rains, commented: “This surge in sales shows that demand is steadfast among first-time buyers – despite upward movement in house prices. In the short-term, first-timers may be finding that competition for properties has eased slightly following a period of intense pressure on landlords to meet the stamp duty surcharge deadline at the beginning of April. With a chronic shortage of homes, one man’s loss is another man’s gain. Subdued landlord demand following the changes is offering some temporary light relief to first-time buyers. Less competition from landlords expanding their portfolios means more houses to buy for first-timers.
However Gill warns that future first-timers could pay the price of Government restrictions on the buy-to-let sector. Demand for cheap properties to rent is being fulled by a swelling population and he believes that cutting landlords out of the equation will simply drive this demand harder still, pushing up rents, and making saving for a deposit for a first-home more difficult.
Additionally, in the last twelve months, the average price paid by a first-time buyer to purchase their first home has risen more than £20,000. With the average first-time buyer income sitting at £40,549, this sum is the equivalent of an extra half-a-year’s salary in terms of total consideration.
As a result, rising house prices have also pushed the average first-time buyer deposit up significantly over the last twelve months. Currently, the average first-time buyer pays £27,290 as a deposit, 13.8% (or £3,300) more than the £23,990 paid on average last April.
However, in a sign of continued competition in the lending market and strong financial support for first-time buyers, the average mortgage rate has fallen 0.45 percentage points over the last year and now stands at just 3.10%. This represents the lowest average mortgage rate for first-time buyers on record.
Monthly repayments currently represent 20.1% of a first-time buyer’s income – just 0.4 percentage points higher than the proportion recorded a year ago.
Adrian Gill continued: “House price growth continues to be the thorn in the side for many first-time buyers. Even as lenders compete to attract first-time buyer business by lowering rates to record lows, mortgage repayments and deposits are getting more expensive due to house prices lifting at the lower end of the market. This is a supply issue. Any efforts to increase housebuilding and stimulate supply will take time. There is no magic wand solution to the first-time buyer housing crunch.
Wider economic woes may also be playing a part. Recently, to some extent, improved wages have helped alleviate the pain of rising house prices. But with growth slipping and the uncertainty around the EU referendum slowing down the economy, higher wages are no longer the salve they were. Thankfully, lower rates and improved availability of financial support to first-timers mean mortgage repayments remain affordable against all the odds.”
