- October sees 28,100 first-time buyer (FTB) completions – a fall of 8.5% on a three-month basis
- Comes despite home-ownership costs levelling off, as the average deposit falls 2.1% over three months
- Over the same period, the average mortgage rate continues to fall while the average LTV climbs
- However, rising purchase prices may be discouraging FTBs, with the average price of a first-time property standing at £128,225 in October – an increase of £4,475 on the same month last year
October first-time buyer sales have experienced a three-month downturn, according to the latest First-time Buyer Tracker from Your Move & Reeds Rains.
First-time buyers completed 28,100 transactions in October, compared to 30,700 three months earlier in July, when the figure marked highest number of first-time buyer sales since August 2007. The difference in volumes between July and October 2015 represents a drop of 8.5% – or 2,600 fewer completed sales.
First-time buyer completions fared little better when looked at on a monthly or annual basis. Between September and October 2015, the number of people who successfully managed to take their first step onto the ladder fell by 1.7% – or by 500 – from 28,600 to 28,100. Equally, first-time buyer sales fell from 28,900 to 28,100 between October 2014 and October 2015, representing a dip of 2.8%, or 800 transactions.
Adrian Gill, Director of estate agents Your Move and Reeds Rains, comments: “First-time buyer sales are enduring a slight winter chill this month. As Christmas fast approaches – alongside all the additional costs that come with it – many will be holding off until the New Year before they put their first foot on the property ladder.
“Despite the slight slowdown, however, the underlying figures remain strong. Sales totals are still high relative to previous years, with no sign that they’re about to slide back to the doldrums of the 2012 and 2013 period. Moreover, with real-terms wages continuing to outstrip inflation and consumer confidence heading ever upwards, there’s every potential for the property market to kick back up a gear just after the New Year.”
Costs of home-ownership stable but purchase prices on the up
The direct costs associated with purchasing a home lightened somewhat for first-time buyers in October. The average first-time buyer deposit now stands at £21,611 – down 2.1%, or £457, on a three-month basis. In addition, the very low average mortgage rate for first-time buyers remained broadly unchanged between July and October, only dipping slightly from 3.43% to 3.34%.
Both deposit and mortgage payments are also consuming proportionally less of a first-time buyer’s income. The proportion of a first time buyer’s average yearly pay eaten up by deposit costs in October fell from 56.2% to 55% over a three-month period. Equally, in the same month, mortgage payments consumed 16% of an average first-time buyer’s salary – down from eating up 16.1% in July.
Moreover, the average loan to value (LTV) rate remains very low. In October the average loan-to-value rate stood at 83.1%, climbing 0.4 percentage points from July, when it stood at 82.7%. Coupled with that, the number of high LTV loans rose 7.3% between July and October, meaning a greater number of favourable mortgage deals are available for first-time buyers.
However, the purchase price for a first home continues to rise steadily. In October, the average price paid for a first-time buyer property stood at £128,225, representing a 0.3% increase on July – when the price stood at £127,795. October’s figure also represents a 3.6% – or £4,475 – increase on an annual basis; in October 2014, the average price stood at £123,750.
Adrian Gill continues: “First-time buyers have been dealt a strong hand this month when it comes to purchase costs. A golden combination has emerged of high LTV rates, low mortgage rates and steadying – if not exactly low – deposit costs. With the Bank of England recently signalling that any rate rise in the New Year will be very cautious and the economic good weather continuing unabated, many who are looking to place a first foot on the property ladder might feel they have the time to see if the environment gets even better.
“Rising property prices are the grit in the otherwise flawless oyster for first-time buyers this month. However, given that the price increases are more sedate than in previous months and the wealth of support available for first-time buyers, this is an obstacle which any determined first-time buyer can easily surmount.”
Regional differences
London remains the priciest location for first-time buyers. The average value of a first-time buyer property in the capital climbed to £328,478 in the three months to July 2015. The South East is the second-most expensive, with average house prices there hitting £216,489 over the same period. Conversely, Northern Ireland and Wales rank as the least expensive regions for first-time buyer properties. Average first-time buyer property values stand at £110,267 in Wales and £85,388 in Northern Ireland. Nationally, the average price for a first home stood at £157,208 in the three months to July 2015.
On average, Londoners put down by far the largest deposit of any region in the three months to July 2015, paying out £83,333 – more than six times the size of the average first-time buyer deposit in Northern Ireland (£12,937). The second-largest deposits are paid by first-time buyers in the South East. Buyers there paid an average of £46,601 to secure their first home in the three months to July 2015, which equated to almost double the national average (£26,102).
Adrian Gill concludes: “A clear gap is opening between the South East and the rest of the UK. With average deposit costs in London more than three times above the UK-wide average, the property market in this corner of Britain is not just taking off but beginning to rocket away from the rest of the UK. This is great news for those who already own property in the capital and for those first-time buyers with the capital – and the drive – to afford owning their first home in one of the world’s most dynamic and prosperous cities.
“But it’s by no means a disaster for those who aren’t quite able to get into the London property market. There are still some great deals available in other parts of the UK. The South West, for example, offers first-time buyers the chance to purchase a decent property at a reasonable price, in a region which boasts historic cities such as Bath and big financial centres such as Bristol – and all within striking distance of London.”
