The number of first-time buyers in the UK rose by 7.3% in 2016, from 312,900 in 2015 to an estimated 335,750, according to the latest Halifax First-Time Buyer Review. This is apparently the highest level since the start of the financial crisis in 2007 (359,900).

First-Time Buyers Integral to the Housing Market

Halifax highlights that first-time buyers are important to the housing market, and that this importance is continuing to grow. In 2006 just over a third (36%) of all house purchases financed by a mortgage were made by first-time buyers. In 2016, this proportion is estimated to have reached almost half (49%), the highest level since 1996.

On average, a first-time buyer paid a deposit of £32,321 in 2016, which is an increase of 113% over the £15,168 paid on average in 2016. This is equivalent to 16% of the average price of a typical first-time buyer home, a substantial fall from 25% in 2009. However, back in 2006, the average deposit had been as low as 10%.

In 2016, the average house price paid by first-time buyers was £205,170 – the highest on record.  Since falling to £135,254 at the height of the housing downturn in 2009, the average price paid by first-time buyers has grown by 52%. In the past year, this average has grown from £191,929, an increase of 7%.

Affordability

Halifax has revealed that Stirling in Scotland is the most affordable local authority district (LAD) in the UK, with an average property price of £137,222; 3.0 times local average gross annual earnings.  Inverclyde (3.1) and West Dunbartonshire (3.2) are the next most affordable. Eight of the ten most affordable LADs for first-time buyers are in Scotland.

As house prices for a typical first-time buyer home have risen, there has been a growing trend towards mortgage terms longer than the more traditional 25-year term. In 2006, two-thirds (64%) of first-time buyers had a mortgage term of between five and 25 years, whilst the remaining 36% were over 25 years.  In 2016, this mix has markedly reversed, with 60% of mortgages at a term of 25 years or more.

“First-time buyers play a crucial role in the housing market, and each transaction has an impact further up the chain, as well as helping to drive levels of housebuilding,” commented Martin Ellis, Housing Economist at Halifax. 

“The number of buyers getting on the housing ladder exceeded 300,000 for the third year in succession – a welcome boost for current homeowners, house builders and the Government,” he added. “Continuing low mortgage rates, high levels of employment have supported the market and Government schemes such as Help to Buy have improved affordability, enabling more first-time buyers to buy their own property.” 

Mortgage Lending

The Council of Mortgage Lenders has also recently published positive figures relating to the first-time buyer market.

According to its data, first-time buyers borrowed £4.7 billion in November 2016, which is an increase of  4% compared to the previous month and a rise of 9% on November last year. This equated to 30,100 loans, up 5% month-on-month and 8% year-on-year.

In addition, the proportion of household income used to service capital and interest rates reached another historic low this month for both first-time buyers and home movers, at 17.5%.

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