According to Halifax, the number of first-time home buyers fell by 22 per cent between January and August this year compared to the same period in 2022.
The numbers reflect a general slowdown in the housing market, largely due to higher inflation and higher mortgage rates.
Although paying a mortgage has become more expensive, Halifax said purchasing the property has become slightly more affordable, even for first-time buyers.
Drop-off: This graph shows the number of first-time homebuyers in the period January to August of each year, from 2013 to 2023
The house price to income ratio for first-time buyers has fallen from 5.8 in June last year to 5.1 currently, the bank claimed, meaning house prices for those getting onto the property ladder are as affordable as they have been since June 2020 no longer.
This is largely due to wage increases rather than falling property prices, the mortgage lender said, although some indices actually suggest prices are falling.
Halifax’s own index showed house prices fell 4.6 per cent in the year to August.
The average first-time buyer now puts down a deposit of £54,116 and buys a home worth £288,030.
The typical age of a first-time buyer in the UK is now 32, and the average age is now 30 or over across all regions of the UK.
According to a Halifax report released last month, the house price-to-profit ratio for all buyers was 6.7, up from 7.3 the previous year.
The number of first-time buyers is lower as they tend to buy cheaper properties.
However, the price to income ratio arguably has a greater impact on them as they have no equity from an existing property to purchase a home and rely solely on their savings.
Price to income ratio: Wage rises mean buying a home may become slightly more affordable for first-time buyers – but they will have to contend with higher mortgage rates (stock image)
The number of buyers is declining across the market
The figures, based on mortgages agreed with Halifax, suggest buyer numbers are falling across the property market.
The share of first-time buyers in mortgages taken out in the first eight months of 2023 is actually slightly higher (53 percent) than in 2022 (52 percent).
For the full year of 2022, the number of first-time buyers fell by 11 per cent – although this was followed by a huge jump of 59 per cent in 2021 as buyers used savings during the pandemic and the stamp duty holiday to get on the housing ladder.
Kim Kinnaird, director at Halifax Mortgage, said: “The rise in property prices over the last decade means that obtaining a suitable deposit remains a significant hurdle.”
“In a housing market with limited supply and interest rates having recently risen sharply, the challenge is then to find the right property, which means there is a lot to consider for any first-time buyer.”
“The expected further fall in house prices this year – along with stronger income growth – could offset higher interest rates somewhat, which will be welcome news for many.”
How much do first-time buyers pay?
According to Halifax, the average deposit required is now £54,116.
Halifax data shows first-time buyers are now paying an average of £288,030 for their homes, down 2 per cent in the 12 months to August 2023. This is consistent with a broader decline in property prices.
The average deposit for a first home today is £54,116 – around 19 per cent of the property price (in 2013 the average deposit was £31,060, around 21 per cent of the property purchase price at the time).
First-time buyers in London pay the largest deposit (average £113,078), while those in the North East pay the lowest at an average of £29,184.
Most affordable locations for first-time buyers
The most expensive regions of the UK saw the biggest declines in property purchases.
The South East – which has the second most expensive average house prices in the UK – saw a 25 per cent fall between January and August this year, although the number of first-time buyers in the region was still much higher (16 per cent). , than 10 years ago.
London and East Anglia recorded the second biggest decline in first-time buyers entering the property market this year, at 24 per cent.
Priced out? More expensive locations such as the South East of England and London saw the biggest decline in the number of first-time buyers last year
Scotland, home to nine of the ten cheapest places in the UK to buy a first home, saw the smallest fall in first-time buyer numbers at 14 per cent.
London was the only region to record a decline (9 percent) in the number of people entering the property market for the first time compared to 2013.
Inverclyde, in the west of Scotland, is the most affordable area to get your foot on the property ladder.
Based on an average income of £39,485 in the area, compared to the average first-time buyer house price of £112,112, those buying a first home in Inverclyde will need to borrow or save just under three times the average salary.
The least affordable area in the country is Newham, east London, where first-time buyers can expect an average property price of £448,435 – almost 11 times the average annual earnings in the area.
A window of opportunity for first-time buyers?
Although their numbers are falling, mortgage experts believe current market conditions could present an opportunity for first-time buyers who can afford to get on the ladder.
This is because there is less competition from other buyers, giving them a strong negotiating position.
Mortgage rates are slowly falling, with some now below 5 percent – which could soon lead to other buyers returning to the market.
If first-time buyers get ahead of them, some mortgage brokers say they can make savings.
David Walsh, director of London-based broker Kite Mortgages, told Newspage: “The UK property market is very much driven by sentiment and given that the interest rate narrative has changed quite dramatically in the last week or so “That’s the case.” More and more buyers are likely to return to the market.
“More buyers means more competition, which can mean higher prices.” With that in mind, I believe now is a good time for first-time buyers. The problem they face, like all buyers, is of course a lack of [available homes].’
Elliott Benson, mortgage broker at Leeds-based Sett Mortgages, added that first-time buyers could also benefit from more landlords currently choosing to sell their properties due to higher mortgage rates and the prospect of greater regulation.
“As landlords sell, it is starting to become a good time to buy, particularly when property listings return to normal and are not £50,000 above the asking price,” he said.
“Instead, we are returning to an actual negotiation, as opposed to a mad bidding war for each individual home – and that will benefit first-time buyers.”
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