Saving up to get on to the property ladder? Take heart as first-time buyer numbers finally recover to their pre-financial crisis level.

First-time buyer numbers have soared to a 12-year high, reaching a level last seen before the financial crisis struck.

A total of 35,010 mortgages were advanced to people buying their first home in August – the highest monthly total since August 2007, according to UK Finance.

The typical first-time buyer borrowed £175,361, the equivalent of 80% of their property’s value.

Although the sum was an average of 3.52 times their pay, close to record-low interest rates meant monthly mortgage payments accounted for just 17.1% of their total household income.

The data from UK Finance supports our own recent research which found that more than a third (36%) of all property purchases in 2018 were made by first-time buyers and that numbers were up by a huge 85% since 2010.

Why is this happening?

This group of buyers has received a significant boost from government assistance schemes, including the Help to Buy equity loan initiative, the Help to Buy ISA and stamp duty exemption.

At the same time, a raft of tax changes has led to a fall in the number of investment landlords increasing their portfolios.

This decline has reduced the level of competition first-time buyers face in the market, as the two groups typically target the same properties.

Three-bedroom semi-detached home in Halstead available with Help to BuyThis three-bedroom semi-detached house in Halstead, Essex is available through Help to Buy and would make a great first home

Who does it affect?

First-time buyers are often described as being the lifeblood of the housing market, as people are needed to purchase properties at the bottom of the ladder to enable existing homeowners to trade up it.

As such, the strong return of first-time buyers is potentially good news for everyone.

But there is growing evidence that first-time buyers are no longer purchasing starter homes, with many leapfrogging the bottom rung of the ladder and going straight to a larger property instead.

This trend was reflected in figures released by the Land Registry for August which showed that while the value of houses had increased by between 1.5% and 2.8%, depending on the property’s size, the price of flats had dropped by 1.8% year-on-year.

If first-time buyers are shunning flats in favour of larger homes, it not only makes it more difficult for second-time buyers to sell their existing property, but they will also face more competition when purchasing their next home, which is likely to drive prices higher.

What’s the background?

While first-time buyer numbers are on an upward trend, mortgage lending to other buyer types was heading lower.

The level of mortgages advanced to home movers was down 5.5% year-on-year, while there was a 3.3% slide in mortgage completions for buy-to-let purchases.

Remortgaging numbers were also more than 2% lower for both homeowners increasing the size of their loan and those borrowing the same amount.

Top 3 takeaways

  • First-time buyer numbers have soared to a 12-year high, matching the level seen before the financial crisis struck

  • A total of 35,010 mortgages were advanced to people buying their first home in August, the highest monthly total since August 2007

  • The typical first-time buyer borrowed £175,361, the equivalent of 80% of their property’s value.

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