Last year proved to be a great one for the mortgage market, with rates falling to record lows (good for consumers) and significant growth in sales volumes (good for everyone!). In even better news, it seems that more people are able to get on the ladder, too, with the number of first-time buyers (FTBs) reaching a seven-year high in 2014, giving a huge vote of confidence to those hoping to follow suit.
The latest Halifax First Time Buyer Review has revealed that an estimated 326,500 FTBs entered the market last year, the highest annual total since 2007 when 359,900 new buyers were recorded. It's an impressive increase of 22% from 2013 when 268,500 FTBs secured their place on the ladder, and also posts a 50% rise in the last two years, marking the third successive annual increase.
Happily, mortgage affordability has also improved substantially in the last few years – largely helped by record low mortgage rates – which could account for the rapid increase in new borrowers. Halifax's figures show that the proportion of a first-time buyer's disposable earnings devoted to mortgage payments stood at 32% in the final three months 2014, a clear improvement from the summer of 2007 when the figure reached its peak of 50%, meaning that new borrowers now have to devote far less of their income to mortgage repayments – which could make a huge difference to their long-term finances.
There's also been a significant fall in the size of the average deposit over the last year, with the typical deposit for first-timers standing at £29,218 in 2014, a drop of 7% from 2013's figure of £31,582. This is primarily due to the growth in availability of high-LTV mortgages, allowing borrowers to get on the ladder with a deposit of as little as 5%. Overall, the trend is clearly a positive one – more new buyers are able to get on the ladder, and they're not suffering from as many affordability concerns as before, either.
"Improving economic conditions and rising employment levels have boosted confidence among those thinking about getting on to the housing ladder, contributing to the significant increase in the number of FTBs in the past two years," said Craig McKinlay of Halifax. "Record low mortgage rates and Government schemes such as Help to Buy have improved affordability, enabling more first-time buyers to buy their own property."
Why not follow in their footsteps? The industry is catching on to this growing trend – more high-LTV deals are being launched at rates far lower than have ever been seen befor, and this, in turn, is further improving affordability for FTBs and helping fuel the positive cycle. Sylvia Waycot, editor of Moneyfacts.co.uk, explains: "The market is responding to a surge of interest from first-time buyers by providing an increasing number of attractive mortgage deals aimed at these new buyers. This is lowering costs and, as such, is further boosting the number of first-timers able to get on the ladder."
Thanks to the low rate/high availability combo, there's never been a better time to take the plunge and realise your dreams of owning your own home. Hopefully you'll have already saved up a suitable deposit, but if not, now's the time to get serious. The fact that deposit requirements are often only 5% will hopefully make the sum seem far less daunting, and even putting away little and often in a dedicated savings account – or even better, a cash ISA – will soon add up. Then, it's all about finding your ideal mortgage! Our best buys will be a great place to start, so get searching and you could soon be joining the ranks of first-time buyers.
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