UK Sees First-Time Buyer Revival

Despite gloomy reports on the lack of affordability for many British buyers trying to get on the property ladder, September saw a healthy 11% increase....

Despite gloomy reports on the lack of affordability for many British buyers trying to get on the property ladder, September saw a healthy 11% increase in first-time buyer completions.

The First Time Buyer Tracker published by LSL Property Services showed that there were 25,800 first-time buyer completions in September, up from 23,200 in 2013.

According to the report, new buyers are also paying more for their first home, with average prices increasing 3% to £150,950, the fourth consecutive month median prices have remained above the £150k mark.

First-time buyers paying more for their homes

Despite the increase in purchase prices, the average first-time buyer deposit fell 8% year-on-year from £28,498 a year ago to £26,134 in September this year. This indicates that Help to Buy facilitated higher LTV (loan to value) lending, making borrowing more accessible for many first-time buyers.

Director of estate agents Your Move and Reeds Rains, David Newnes commented: "Help to Buy has helped keep the blood pumping in the first-time buyer market over the last year, allowing borrowers struggling to save for a deposit the financial life support they need to purchase property".

"At the same time, MMR regulations have performed a health-check on their finances, ensuring they will be able to withstand a future base rate rise. Lenders have increased the range of higher LTF options available to borrowers, allowing the average first-time buyer deposit to fall even as purchase prices increase."

Lending tied to wages much more than in the past

"But the sands are shifting in the first-time buyer market. Loan-to-income caps announced in June have added further restrictions for lenders to factor in, on top of the tranche of regulations implemented in April. The effect is that lending is tied to wages much more tightly than in the past. Borrowers increasingly have to prove their financial resilience to access the higher LTV deals available. There is more lending but at the same time it is more responsible and sustainable."

First-time buyers are a vital component of the machinery driving the property market recovery, with many only just finding themselves in a financial position to obtain mortgage finance.

Volume of first-time buyers good barometer for economy's state of health

London markets, unsurprisingly, are seeing the largest increases in property prices, driven principally by foreign buying. However, many industry insiders believe that foreign demand for prime property in the capital will begin to slow with the lower end of the market continuing to see consistent demand, particularly from first-time buyers.

The increase in first-time buyers entering the UK's property market, albeit modest, is a very strong signal of an overall improved economy. For property markets to experience sustainable growth, rising domestic demand is essential. As people become more secure in their employment they will seek to secure their future with a property purchase.

- Friday 24 October 2014

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