The number of first time buyers in 2012 jumped 17.7 per cent to 26,400 in December 2012, compared to the same month the previous year.
The latest First Time Buyer Monitor from LSL Property Services found that, in total, 2012 saw 219,400 first time buyers use mortgage finance with any size of deposit to secure their first home, a 14 per cent increase on the total number in 2011.
The average mortgage rate for first time buyer dropped to 4.6 per cent in December. This is the lowest rate since March 2012, and a fall from 4.72 per cent in November.
However, it is buyers with bigger deposits that are benefitting from the lower rates as banks keep criteria tight. The average LTV fell slightly from 79.1 per cent to 78.8 per cent in December, a fall from 80.1 per cent a year ago. The average deposit size for first timers rose to £28,525, 2.3 per cent higher than in November.
As first time buyer house prices rose by 0.9 per cent to £134,616 in December and the average LTV dropped in December, the affordability of deposits fell, representing 83.9 per cent of a first time buyer’s average salary in the month. However, falling rates for those able to match lenders’ criteria offset the increased average mortgage advance, and mortgage repayments remained stable at 21 per cent of an average first time buyer’s income.
On an annual basis, the affordability of the average deposit worsened from the 80.7 per cent of a buyer’s annual income in December 2011. However, as a result of a smaller average mortgage advance and marginally wealthier first time buyers, mortgage payments are slightly more affordable than a year ago, falling from 21.3 per cent of a first time buyer’s income last year.
David Brown, commercial director of LSL Property Services, said: “2012 saw more new buyers on the move than the previous year, but the first time buyer market is a long way from rude health. The Funding for Lending Scheme hasn’t yet been a panacea for the market, but it is bringing down rates for those buyers able to meet lenders’ requirements. The size of deposits renters must save before they can move into their first home isn’t yet reducing, and this remains the key stumbling block from preventing new buyer numbers returning to anything like their pre-crunch level.”
“As is usual, applications showed signs of falling back in December, and it won’t be a shock to see a seasonal slide in completions in the early part of 2013. But with the easing of capital adequacy rules and a stronger labour market, we expect lenders to be able to better utilise the Funding for Lending scheme as the year progresses, and it could well improve the prospects for an increasing number of first timers.”
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