More Towns Affordable For First-Time Buyers

The proportion of towns and cities across the UK that are affordable for first-time buyers has risen to its highest level since 2003, according to the latest Halifax First Time Buy

Related topics:  Mortgages
Millie Dyson
8th August 2011
Mortgages
The average house price paid by a first time buyer in June 2011 was affordable for someone on average earnings in 48% of all local authority districts (LADs). This is the highest proportion of housing affordable for first time buyers in eight years, and compares with 40% in 2010 and just 6% in 2007.

North-South divide in the most affordable areas for FTBs

80% of all LADs in the North of the UK are affordable for first-time buyers: ten times the proportion of affordable areas in the South (8%). The North East is the only UK region where all LADs are affordable for FTBs. In contrast, London is the only region with no affordable areas for first time buyers on average earnings.

But the number of FTBs entering the market remains constrained...

Despite the improvement in affordability, the number of FTBs has decreased slightly over the past year in line with the market.

Halifax estimates that there were around 86,000 first-time buyers in the first half of 2011: a fall of 10% from the same period in 2010 and close to half the number in the first six months of 2007 (181,500).

...driven by the need to put down an average deposit of over £27,000...

FTBs put down an average deposit of £27,719 in the first half of 2011, equivalent to 21% of the property price.

There are signs that more products for buyers with smaller deposits are being made available. This is partly reflected in an 8% fall in the average deposit from £30,251 since the same period in 2010.

.. amidst significant pessimism over the likelihood of getting a mortgage

Halifax's recent Generation Rent report revealed that many potential FTBs have given up on the possibility of getting on the housing ladder. 77% of non-homeowners still aspire to own their own home, but half (46%) believe that Britain is becoming a nation of renters because of the obstacles facing first time buyers. 

55% believe first time buyers are too scared of being turned down to apply, despite the fact that Halifax accepts 8 out of 10 mortgage applications from first time buyers.

Suren Thiru, housing economist at Halifax, commented:

"It is encouraging that housing affordability for first time buyers in general has improved significantly over recent years, as a consequence of the marked falls in both house prices and interest rates since 2007.

"However, there is a distinct North-South divide within this improvement as the majority of affordable areas are in the North."

Halifax continues to respond to constrained FTB market...

Halifax announced in June that it would launch its First Time Buyer Pledge with the aim of educating customers on what they should expect from the mortgage application process and dispelling some of the fears and misconceptions that has led many to give up on their dream of owning a home altogether.

Stephen Noakes, Commercial Director, Halifax Mortgages, commented:

"The significant challenges in raising a deposit and widespread pessimism about the chances of being accepted for a mortgage are clearly preventing some potential first time buyers from even attempting to get on the ladder. 

"However, at Halifax we accept 8 out of 10 first time buyer applications and, as these latest figures show, there are opportunities for those who do want to but their first home. 

"The key is to provide more information, more education, and more help for non-homeowners in order for them to make the most of those opportunities: it is with this intention that we have launched the Halifax First Time Buyer Pledge".         

The Halifax First Time Buyer Pledge has four declarations:

- We'll let you know the criteria we'll use to assess your application

- We will provide a personalised mortgage promise for how much we can lend you, without leaving a lasting record on your credit profile

- If your application is unsuccessful, we'll help you understand why

- Whether your application is successful or not, we will provide you with an action plan to move forward.

In order to support that Pledge, Halifax will be rolling out a spate of new initiatives over the coming months in order to better inform and support first-time buyers who want to get on the ladder, but who are afraid of doing so.

Additional Key findings

House Prices

Nationally, the average house price paid by a first time buyer has fallen by 4.1% (£5,732) over the past year from £140,883 to £135,091. Over the past decade, FTB property prices have risen by 76% from £76,855 in 2001 to £135,091.

Deposits and Advances

The average FTB deposit in the first six months of 2011 was £27,719.  This was more than double the average of £12,874 in 2001.

FTBs in the capital put down the largest average deposit - £57,579 - 24% of the property value. In contrast, FTBs in the North put down the smallest average deposit - £15,966 - 16% of the property value.

The average mortgage advance is £107,371; down 3% on a year ago but up by 68% (£43,390) compared with a decade ago.

Age

The average age of an FTB is 29 years old. FTBs in Yorkshire and Humber and Wales are, on average, the youngest at 27 year olds
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