New affordability analysis from Rightmove has revealed that, despite the affordability challenges facing first-time buyers, their demand is up 32% from pre-pandemic levels in 2019.
Affordability is undoubtedly worsening: the average first-time buyer type home is now 7.2 times the average salary, up from 6.9 times in 2019. The average 10% deposit for a first-time buyer home has risen by 17%, to £22,409.
Rising asking prices and interest rates means that the average monthly mortgage payment for new first-time buyers putting down a 10% deposit is now £1,032. This is 39% higher than the same time in 2019.
The majority of areas to see affordability improve during the pandemic are in London or in traditional commuter areas, albeit only slightly. Affordability has improved in these areas due to local salaries increasing at a faster pace than house prices.
Yet, despite affordability being stretched for many, enquiries for first-time buyer type properties are significantly up on the more normal market of 2019. Demand for first-time buyer type properties is up 32% compared with 2019, though it has dropped by 9% compared with the frenetic market of last year.
Tim Bannister, Rightmove’s Data Expert commented:
“Despite stretched affordability, we’re not currently seeing rising prices and interest rates having a significant impact on first-time buyers wanting to move. Though demand for first-time buyer homes has expectedly eased from the heady levels of last year, it’s still significantly higher than it was back in 2019, suggesting many first-time buyers are factoring in rate rises into their own affordability.”
Kate Eales, head of regional agency at Strutt & Parker, said:
“Affordability is a long-standing barrier for first time buyers looking at homeownership. There are several factors at play here. Across the country, the pipeline of new properties coming to the market for sale has not kept up with demand, and there is also a lack of suitable housing coming through for first-time buyers. A decade of mostly upward rents has put further pressure on saving for a deposit, and a rising market means that the goalposts have kept moving. All this has been exacerbated in recent months with rising interest rates, making mortgages more expensive, while inflation is driving down real income.”
Mark Howell, Regional Sales Director at Michael Jones & Company in Sussex said:
“We’ve seen an increase in the average age of first-time buyers as well as gifted deposits, which indicates that it could be taking first time buyers longer to acquire their deposits due to the rise in house prices. Salary levels have also slowed down in relation to house prices in the last few months, creating a wider gap between wages and affordability.”
