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It costs first-timers more than ever to buy a home

It costs first-timers more than ever to buy a home

Category: Mortgages

Updated: 01/07/2016
First Published: 01/07/2016

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 It is now over 6 months old so the content may be out of date.

Taking that first step on the ladder has always been difficult, but it seems that it's becoming even more of an impossible task at present, with new figures from Your Move and Reeds Rains finding that the price of a typical first-time buyer home has hit the highest ever level.

According to the estate agents, it cost first-time buyers an average of £173,282 to get onto the housing ladder in May, up 2.7% from the £168,656 they paid in April – and a whopping 15.8% more year-on-year, with the average first-time buyer (FTB) paying £149,645 in May 2015.

This means that FTBs now typically pay £23,000 more to buy their first home than they did a year ago, with the current average now being the highest on record.

Despite the boost in purchase price, house sales in this sector are still strong, with completed FTB sales totalling 24,900 in May. This is just 0.8% lower than the 25,100 seen in April – arguably as first-time buyers were held back by a lack of homes on the market ahead of the EU referendum – but marks a welcome improvement of 5.1% year-on-year.

"May saw a crunch in the number of homeowners putting up a 'for sale' sign as many sellers held back to see the result of the EU referendum," explained Adrian Gill, director of Your Move and Reeds Rains, "but Brexit worries haven't dented first-time buyers' appetite to own their own home.

"Many still want to capitalise on the record low mortgage rates available at the moment which mean that monthly mortgage repayments are increasingly affordable."

Indeed, the figures went on to reveal that the average mortgage rate for first-time buyers is continuing to fall and hit a new record low of 3.08% in May, equating to a drop of 0.37% over the past year and 0.02% in the last month alone. This means that, even though average purchase prices have increased, mortgage repayments haven't increased significantly as a proportion of income – they now account for 21.1% of a typical first-time buyer's earnings, just 1.7% more than a year ago (20.5%).

The average FTB deposit has risen, too – unsurprising given how much prices have jumped up – with the average first-time buyer now stumping up £27,669 for a deposit, up 12.8% (or £3,146) from £24,523 a year ago, and equating to 69.8% of the typical FTB income (up 6.1% year-on-year).

"High LTV mortgage options like the Help to Buy schemes are giving more first-time buyers a fighting chance of getting on the housing ladder, but putting together a chunk of cash to put down on a property remains problematic for many," continued Adrian.

"Some first-timers are helped by the Bank of Mum and Dad, or through an inheritance or gift from a family member. Others are forced to move home with their parents while they save. But most continue to struggle to save while paying a considerable proportion of their income on rent."

Does that sound familiar? Given how expensive rent can be these days, it's not surprising that it can be so tricky to save that all-important deposit, and is why a bit of willpower is key. Be ruthless with your spending and put everything you can into a dedicated savings account, and hopefully, you'll soon be able to amass a suitable sum.

What next?

Got the deposit sorted? Then compare the top first-time buyer mortgages to make your money go as far as possible

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.