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First-time buyers paying record prices

First-time buyers paying record prices

Category: Mortgages

Updated: 03/07/2017
First Published: 03/07/2017

Recent figures show that first-time buyers are currently driving housing activity, which makes it all the more disappointing to find that they are now paying a higher price than ever before to take that first step on the property ladder.

First steppers up

The latest findings from Halifax reveal that the average first-time buyer house price stands at £207,693, the highest on their records. This is while an estimated 162,704 managed to reach that first step in the first six months of 2017, only 15% below the peak of the last boom in 2006 (190,900), according to Halifax's First Time Buyer Review.

The figure is also up from the same period in 2016, when it stood at 154,200, and is double the market low witnessed in the first half of 2009 (72,700). Clearly, first-time buyers are not being hugely deterred by the high property prices, possibly due to the record low mortgage rates that we have been witnessing for some time now. That said, the growth in the number of first-time buyers has slowed to just 3%, down from 10% last year.

Interestingly, the percentage of the house purchase market occupied by first-time buyers has remained stable at 47% for the last four years, when looking at the first halves of each year. It is no coincidence that this level has been maintained since the launch of the Help to Buy scheme in April 2013, which was followed by a 44% increase in the number of first-time buyers.

"For the third time in four years the numbers getting on the housing ladder have exceeded 150,000 – a level of momentum not seen since before the financial crisis," said Martin Ellis, housing economist at Halifax. "High levels of employment, low mortgage rates and government schemes such as Help to Buy have also helped these numbers remain robust, as first-time buyers continue to form a fundamental part of the UK housing market."

Record high house prices

Meanwhile, the average value of a typical first-time buyer home has grown by 4% over the past year, from £199,414 to £207,693. What's more, over the past five years the average price has grown by a whopping 50%, from £138,663, outperforming the across-market price growth of 42%.

As a result, the average first-time buyer deposit was £32,899 in the first six months of 2017 – 16% of the purchase price. What this shows is not only that those saving for a first deposit may want to keep saving a bit longer, but also that a lot of first-time buyers are not opting for first-time mortgages (i.e. those available on a 5% deposit). This could be quite sensible, as the rates available in the general mortgage market are generally lower than those on 95% loan-to-value deals, regardless of if you compare discounted variable rate mortgages or look at fixed mortgage rates.

As usual, Greater London saw the highest first-time buyer house prices, with an average of £409,795, followed by the South East (£276,773) and the South West (£202,700). In contrast, first-time buyers will find the lowest house prices in Northern Ireland (average £117,716) and the North (£125,591).

No matter where you buy, we're here to help, with tips on how to save up a deposit, options to check your credit score and a rundown of the key steps to getting on the property ladder – not to mention the first-time buyer and other mortgage Best Buys.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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