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First-time buyer sales get a winter boost

First-time buyer sales get a winter boost

Category: Mortgages

Updated: 06/01/2016
First Published: 06/01/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

If you're a first-time buyer, you'll hopefully be finding the market a little easier to cope with at the moment. Not only do our own figures show a definite uptick in the number of mortgage's available to those with a small deposit, but additional research shows that affordability is improving, and as a result, sales to first-time buyers (FTBs) are on the rise.

Post-crisis high

The latest First-time Buyer Tracker from Your Move and Reeds Rains shows that the number of completed FTB transactions rose to 31,300 in November, which equates to a monthly increase of 4.7% (up from 29,900 transactions in October) and a particularly notable rise of 23.7% year-on-year, with 25,300 FTB sales recorded during November 2014.

Significantly, it also marks the highest FTB sales total seen since August 2007, before the financial crisis took hold, when the number of completed transactions stood at 35,300. Would-be buyers are clearly starting to get in on the action, and much of it could be down to the combination of a healthy mortgage market, an improving economy, and better affordability overall.

Positive market

The figures went on to reveal that the average price of a typical FTB property has fallen on both a monthly and annual basis, which suggests that affordability for many prospective buyers could be improving: the typical purchase price currently stands at £148,385, down 3.0% from October (£153,035) and a drop of 4.7% (or £7,360) year-on-year.

This has helped the average deposit paid by first-time buyers (£24,598) fall by 4.6% on a monthly basis and 4.2% annually, while typical mortgage repayments now account for 18.6% of an average buyer's income, down 0.5% from October (when mortgage repayments took up 19.1% of an average FTB salary) and 1.7% from November 2014.

"First-time buyer numbers have enjoyed a strong 12 months," said Adrian Gill of Your Move and Reeds Rains. "Despite a shaky start at the beginning of 2015 – as sluggish real-terms pay rises and worries about the health of the economy held back some – first-time buyers recovered their confidence in time for Christmas."

He noted that there were a number of factors behind these "solid figures", including Government initiatives (such as Help to Buy), rising wages and record low mortgage rates, as well as the trend for buyers to become "increasingly cost-savvy". Buyers are not only taking time to research the market and find the best-value properties, but they're "driving a hard bargain to get what they want", and this determination is paying off.

What does the future hold?

However, there are fears that, despite everything being rosy at present, it may not continue for much longer. The average mortgage rate for first-time buyers has fallen notably in the last year (down from 3.92% to 3.37%), but there are signs that those rates are beginning to edge up, with November's average rate representing a 0.03% rise on the rate seen in October (3.34%).

We always knew that mortgage rates couldn't stay at record low levels forever, and with the prospect of a rise to base rate edging ever-closer, they had to start rising eventually. The ongoing lack of supply could continue to place upwards pressure on the market, too, and that could mean affordability becomes strained in the future.

"The question going into 2016 will be whether first-time buyers can continue playing hard ball with a smaller housing stock, as well as contend with less favourable mortgage deals as the Bank of England creeps ever closer to that long-awaited interest rate rise," said Adrian, so the key is to act fast! If you spot a house you love and a mortgage that suits your needs, don't hang around – get the process started and you could add to the tally of completed house sales before prices, and mortgage rates, creep up.

What next?

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