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.
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.