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Blood still pumping in FTB market as sales up 11%

Date online: 24/10/2014

There were 25,800 first-time buyer completions in September 2014, 11% more than 23,200 a year ago. New buyers are also paying more for their first home. The average first-time buyer purchase price rose 3% over the same period to £150,950, the fourth consecutive month in which average purchase prices have topped £150,000.

Despite purchase prices rising, the average first-time buyer deposit fell 8% year-on-year from £28,498 twelve months ago to £26,134 in September 2014 – as Help to Buy made higher LTV lending more accessible for borrowers.

At the same time, deposits fell even faster as a proportion of annual income. The average first-time buyer deposit represented 67.6% of annual income in September, 12 percentage points lower than in September 2013.

David Newnes, director of estate agents Your Move and Reeds Rains, comments:

“Help to Buy has helped keep the blood pumping in the first-time buyer market over the last year, allowing borrowers struggling to save for a deposit the financial life support they need to purchase property.

At the same time, MMR regulations have performed a health check on their finances, ensuring they will be able to withstand a future base rate rise. Lenders have increased the range of higher LTV options available to borrowers, allowing the average first-time buyer deposit to falleven as purchase prices increase.
 
But the sands are shifting in the first-time buyer market. Loan-to-income caps announced in June have added further restrictions for lenders to factor in, on top of the tranche of regulations implemented in April. The effect is that lending is tied to wages much more tightly than in the past. Borrowers increasingly have to prove their financial resilience to access the higher LTV deals available. There is more lending, but at the same time it is more responsible and sustainable.”

On a monthly basis, first-time buyer transactions fell back 11%, though this was due to a seasonal fall between summer and autumn. In fact, the fall was less than last year: transactions fell 12% between August and September 2013.

Despite a slowdown in lending over the summer, the latest e.surv Mortgage Monitor revealed that house purchase approvals grew slightly in September, after three months of decline over the summer, hinting that the pause in the lending recovery is coming to a close. However, total approvals were still 2% lower than a year ago in September.

At the same time, lending to higher LTV borrowers remains strong, despite falling total approvals. There were 11,588 house purchase approvals to borrowers with a deposit worth 15% or less of the total value of their property in September, 1% more than in August 2014 and 45% more than September 2013. It was the second highest monthly number of higher LTV approvals since June 2008, with June 2014 the only month to outstrip September.

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