However, 2014 as a whole still saw substantially more first-time buyer sales than 2013, with 311,300 first-time buyer completions in 2014 – 15% more than 270,500 in 2013.
The average first-time buyer purchase price has risen 3.0% year-on-year, reaching £155,413 in December. First-time buyer deposits have also risen – but at a much slower pace – as Help to Buy has allowed more higher LTV borrowers access to finance. The latest Mortgage Monitor from e.surv showed that lending to higher LTV borrowers increased 5% month-on-month in December.
The average first-time buyer deposit was £27,384 in December 2014, up from £26,961 in December 2013, with recent stamp duty savings helping first-timers to put together larger deposits. First-time buyers paying the average purchase price (£155,413) would have been liable for stamp duty fees of around £1,550 before the graduated system was implemented, but this would now have been reduced to £600 – meaning savings averaging £950 which have boosted their deposit capacity.
The average purchase price for first-time buyers in London climbed above £300,000 for the first-time on record in Q4 2014 – compared to an average of £151,692 across the UK. At the same time, the average deposit size for buyers in the capital climbed to £74,133, also a new record.
Similarly, purchase prices in the South East crossed the £200,000 threshold in Q4, as the average purchase price rose to £202,933. Despite these climbing prices, there were 16,800 first-time buyers in the South East over the quarter.
Adrian Gill, director of estate agents Your Move and Reeds Rains, comments:
“On paper, now is a fantastic time to get onto the housing ladder. Mortgage rates are at record lows, pushed downwards by falling inflation and rising certainty that an interest rate rise will be put off until the tail end of the year – if then. At the same time, wages are healthier, and first-timers are seeing their finances recover from the plague of the recession. On top of this, the government has extended an additional helping hand to first-timers with the revision of stamp duty, whichwill particularly benefit those buying in the capital.And the Help to Buy scheme remains in place, providing a shortcut to saving for a large deposit, meaning first-timers can lock into the property market before prices climb further.
“But despite this combination of favourable conditions, the number of first-time buyers has fallen back. Mortgages are more accessible than ever, but fewer buyers are taking advantage of the finance on offer. Misunderstanding over new regulation, global economic uncertainty and a lack of cheap homes are stymieing the recovery in first-time buyer numbers, causing a temporary dip in December.”
Under half (43%) of first-time buyers said they were able to self-finance their purchase in December. A third (34%) reported that relatives helped them to put together a deposit, compared to 37% in December 2013. Use of the Help to Buy Scheme helped fill this gap - in total, 9% had made use of Help to Buy in December 2014, with 4% taking advantage of the equity loan scheme and 5% using the mortgage guarantee scheme. This compares to just 3% reporting they had used either aspect of Help to Buy twelve months before.
A further 9% of first-timers revealed they had benefited from an inheritance. And 4% reported that relatives were going to help them with mortgage repayments.
Adrian Gill, director of estate agents Your Move and Reeds Rains, explains:
“Help to Buy is filling a vital gap – helping those who can’t afford to put together a large deposit to get onto the housing ladder regardless. This is all the more important as the Bank of Mum and Dad is starting to dry up – the proportion of first-time buyers receiving help from their parents has fallen compared to last year. And, crucially, Help to Buy is allowing those in areas of the country still waking up from the coma of the crisis to get onto the housing ladder – areas which are now only just beginning to feel the energy emanating from the economic recovery.”
A third of prospective first-time buyers said that the recent changes to stamp duty would make them more likely to buy, with 15% reporting that they are ‘much more likely to buy’ as a result of the changes and 17% saying they are ‘slightly more likely to buy’. However, the changes have had no effect on the majority of buyers, with 59% revealing the overhaul would have no impact on their decision.
Adrian Gill continues:
“The stamp duty shake-up means that buyers looking to purchase property sitting just above one of the old thresholds stand to save a bundle on upfront costs. But for first-time buyers, the reforms will only touch certain regions of the country. In some areas, the typical first-time buyer property is priced far below the lower stamp duty threshold, and so the changes will have no direct impact on many local first-timers. However, the overhaul will still invigorate these areas, adding an extra incentive for home-movers further up the chain to trade-up, encouraging more activity in the market.”
