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Rising demand from first-time buyers

Rising demand from first-time buyers

Category: Mortgages

Updated: 15/03/2016
First Published: 03/03/2016

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 It is now over 6 months old so the content may be out of date.

Demand from first-time buyers shows no sign of slowing down, and instead has seen a significant rise year-on-year, with the latest First-Time Buyer Barometer from Your Move and Reeds Rains showing that the number of completed first-time buyer sales stood at 27,900 in January.

Despite marking a slight drop from December's total of 29,300 (-4.8%), it represents a 38.8% uplift from January 2015, when the figure stood at 20,100. However, this growing demand could be putting upwards pressure on the market, with the average price of a first-time buyer (FTB) home rising steadily: the figure stood at £165,945 in January, an increase of 1.9% from December (£162,853), and up 12.9% on an annual basis from £146,952 – an increase of £18,993.

In turn – and as would be expected given the rising cost of housing – the costs associated with buying that all-important first home are similarly rising, with the average first-time buyer deposit standing at £28,393, up 6.3% (or £1,692) on a 12-month basis and the highest since August 2013. The average first-time buyer mortgage has similarly risen in value, standing at £137,552 in February, up 1.3% on a monthly basis and 14.4% year-on-year.

However, this hasn't put a dampener on enthusiasm. In contrast, optimism among many would-be buyers is actually on the rise, with 15% of those currently in rented accommodation expecting to buy their first home in the next 12 months, up from 6% who said the same six months ago. At the same time, the proportion of tenants who think they'll never be able to buy is steadily falling, down from 12% in September last year to 10% in January 2016.

Overall, 94% of tenants still want to own their own home, unchanged from a year ago, which just shows how hungry people are to have a place of their own. Additional figures show that they're becoming less picky about where that first home is, too, with the survey finding that many FTBs would be willing to purchase slightly unusual properties.

For example, the figures show that 57% would be willing to live in a former school in order to put their first foot on the property ladder, while 53% were prepared to purchase an ex-barracks and 50% would accept a converted church. "Whether it's bedding down in a barracks or saying 'home sweet home' to a hospital, many first-time buyers are ready to get creative to snap up their first home," said Adrian Gill, director of Your Move and Reeds Rains.

"It's a testimony to the pluck and ingenuity of first-time buyers that they're willing to break the mould and live in places their parents wouldn't have dreamed of inhabiting… with home values rising and demand at the bottom end of the market showing no sign of letting up, ex-public buildings could offer the value-for-money many first-time buyers crave."

He went on to point out that FTBs have come to expect daunting deposit costs and prohibitive property prices, but these things aren't putting them off – they're coping admirably with the extra challenges, and "ultimately, the desire among first-time buyers to own their own home is outweighing those considerations as they resolve to get on the property ladder sooner rather than later – be that through saving money or compromising on their property specifications", he said.

It could be a great time to follow suit, too. The property market as a whole is in a fine bill of heath, and with mortgage rates at record lows, affordability hopefully won't be too much of an issue. Why not see what kind of mortgages are out there? By having the right deal at your side, your dream of owning your own home could be one step closer to reality.

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