The average purchase price paid by first-time buyers in March stood at £166,559. The figure represents a 1.2% dip – or £1,980 lower in absolute terms – on February’s average of £168,539, which previously marked the highest average price on record. However, on an annual basis, the average purchase value of an FTB property rose by 9.2% – or £14,054 – from March 2015’s figure of £152,505.
Deposit and monthly mortgage payment costs also declined somewhat. First-time buyer deposits averaged £28,233 in March – a 4.1% (£1,218) lightening on February’s total of £29,451. In addition, the proportion of an average first-time buyer’s monthly income that is consumed by deposit costs fell 3.1 percentage points between February and March – from 74.9% to 71.8%. Meanwhile, over the same period, monthly mortgage payments accounted for a steadily decreasing amount of average first-time buyer income – falling from consuming 20.4% of monthly income in February to 20.3% as of March.
Besides the falling costs of homeownership, lending conditions for first-time buyers have remained favourable. The average loan-to-value (LTV) ratio reached 83% in March, marking a 0.5 percentage point uptick on the previous month, meaning first-time buyers will be able to borrow more against the value of the home they wish to purchase. Meanwhile, signs of strength from higher LTV lending are supported by evidence from e.surv’s Mortgage Monitor which reported that, between February and March, the proportion of the mortgage market accounted for by higher LTV loans rose 1.4 percentage points, from 15.7% to 17.1%.
Alongside this, the average first-time buyer mortgage rate continues to fall, dropping from 3.14% in February to 3.13% in March. Equally, the size of the average first-time buyer mortgage remains large – standing at £138,326 in March. While the figure marks a 0.5% dip on February’s figure (£139,088), it also represents an increase of 8.6% on March 2015’s average of £127,327.
Adrian Gill, had this to say: “First-time buyers are benefitting from some fiercely fortunate conditions in March. With a golden combination of high LTV lending and low mortgage rates, securing the finance for a first home is within the reach of many who previously wrote it off as a pipe dream. There are also encouraging signs that rising home values – ever the nemesis of the cash-conscious first-time buyer – are beginning to cool. This is partly a result of the Government-backed affordable home scheme increasing supply at the lower end of the market and partly an indication that those setting foot onto the ladder are toughening up their act by driving harder bargains with vendors or finding good value locations in which to become a homeowner.
While deposit costs are considerable – and continue to consume a large chunk of first-time buyer income – there are signs that the financial burdens they impose are gradually lightening. As wages steadily rise and inflation remains very low, many first-time buyers are finding that, in real-terms, they are getting better off. So, even if deposit levels aren’t quite falling at the rate many would like to see, those looking to own a home for the first time are finding that the economic climate is making them better able to carry the cost.”
Regional Differences
In the capital, the average value of a first-time buyer property hit £321,247 in the three months to March 2016. Second to London, the South East is the second-most expensive region, with average FTB house prices there standing at £214,574 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 £113,909 in the North East and £99,298 in Northern Ireland. Across the UK, the average price for a first home stood at £154,889 in the three months to March 2016.
On average, Londoners put down by far the largest deposit of any region in the three months to February 2016, shelling out £73,676 – more than five times the size of the average first-time buyer deposit in Wales (£12,872). The second-largest deposits are paid by South Eastern first-time buyers, who paid an average of £39,663 to secure their first home in the three months to March 2016. Nationwide, the average first-time buyer paid out £25,270 in deposit costs.
Adrian Gill concludes: "With values in London reaching more than double those of the rest of the UK, the dominance of the capital appears to be entrenched – and it’s little wonder given the cultural and economic allure of one of the most prosperous cities on earth. However, as London begins to inhabit a price bracket of its own, other trends are emerging in the UK housing market.
Many families and young professionals, unready for the costs of the capital and its satellite towns, are looking to put down roots beyond the south eastern corner of the UK. The above-average deposit costs in the South West demonstrate the popularity of cities like Bristol and Exeter, which boast many of the same professional-level job opportunities in London, as well as similar infrastructure, but vastly lower home values.”
