Posts with tag: first time buyer deposits

First Time Buyers at Lowest Level for Three Years

Published On: July 17, 2015 at 9:57 am


Categories: Landlord News

Tags: ,,,

The property market is already struggling to welcome first time buyers. But new data reveals that things aren’t getting any better.

Latest research shows that the amount of first time buyers has fallen to its lowest level for three years.

Numbers decreased by around 20% during May, compared to May 2014, found estate agents Your Move and Reeds Rains.

First Time Buyers at Lowest Level for Three Years

First Time Buyers at Lowest Level for Three Years

The data also indicates that first time buyers have larger deposits to save for, at an average of £25,134. This figure has increased by 4.2% in 12 months.

Additionally, the proportion of a first time buyer’s income spent on the average deposit is rising for the first time in four months, up 1% to 64.4% of earnings compared to the previous month.

These findings arrive as the Bank of England (BoE) warns that homebuyers are committing to “bigger and bigger mortgages” because house prices are growing faster than wages.

In its latest financial stability report, the BoE cautioned that property debt relative to salaries “remains high compared with historical and international norms.”1

The Bank put new restrictions on borrowers last year, stating that most mortgages will only be approved if the buyer hopes to borrow 4.5 times their income or less.

Your Move and Reeds Rains’ Adrian Gill, says: “Many first time buyers are still on tight monthly incomes, struggling to save while savings rates stay so low.

“Meanwhile, deposits are rising primarily as property prices continue their seemingly unstoppable upwards march. This is wholly due to a lack of housing supply versus a stack of housing demand.

“If we want to see property prices stabilise and deposits fall as proportions of income, the Government must address the housing supply problem, for which there is only one solution: build more homes.”

The average first time buyer home is worth £154,000, up almost 7% on last year. This compares to the average house price in the UK of £214,000, according to Zoopla.

Gill continues: “While buyers may grumble, rising property prices are a positive sign. They demonstrate that the continuing fall in the average mortgage rate combined with the brightening economic outlook has left plenty of demand in the first time buyer housing market.

“This is despite May’s threat of a highly uncertain election outcome. Schemes such as the Help to Buy ISA have encouraged all sorts of buyers to overlook temporary political uncertainties and save up to make the dream of home-owning a reality.”1 

The Help to Buy ISA is due to launch this autumn. It will give first time buyers a £50 top up for every £200 they save towards a deposit. The Government payments are limited to £3,000 on £12,000 of savings and a prospective buyer can only open one account.

It will be introduced after the Help to Buy scheme helped buyers with a small deposit purchase a home.


Home Deposits at a Record High of £72,000

The average residential property purchase deposit is now £72,302, suspected to be a record high.

The latest data from the Mortgage Advice Bureau (MAB) reveals that buyers were paying substantial sums in May; the highest figure since the MAB began recording the data in March 2009. The previous peak of £71,474 was recorded in June 2014.

Home Deposits at a Record High of £72,000

Home Deposits at a Record High of £72,000

In May 2014, borrowers took out an average loan of £161,887 and put down an average deposit of £69,238. Deposits are now £3,064 higher than a year ago.

According to the research – surveying over 600 brokers and 900 estate agents – average loans also reached record heights in May. The average loan size has now risen for four consecutive months.

Generally, homebuyers in May applied for loans of £167,842, up from the previous high of £166,141 in April 2015.

The new data, which includes buy-to-let mortgages, will come as bad news to first time buyers, who are paying record high rents and having to save more for a deposit.

The MAB says that the issue is “concerning” and the impending Help to Buy ISA will not help much on its own. The ISA will give individual first time buyers a tax break of up to £3,000 on £12,000 of savings for a deposit.

The MAB’s Head of Lending, Brian Murphy, comments: “Measures introduced to the mortgage market since the recession mean there are multiple checks and balances to ensure that people do not borrow beyond their means.

“Thanks to recovering house prices, many existing homeowners have extra equity in their properties and can balance their borrowing commitments with a significant stake of their own.

“Putting up a 30% deposit helps to unlock some of the best rates on the market and helps keep mortgage payments even more affordable. The rise of deposits is less encouraging for first time buyers, but there is at least some hope that more low cost properties will become available as second and third-steppers make their move up the ladder.”

Murphy continues: “The range of affordable schemes to support first time buyers will soon be boosted by the arrival of the Help to Buy ISA. All the same, the savings scheme will not be enough on its own to solve the long-term issues that are driving up prices and deposits across the market.”1