First-time buyer numbers climbed 28 per cent in November 2013, according to the latest tracker from LSL Property Services, with lower mortgage rates credited for the rise.
There were 27,800 first-time buyer (FTB)sales in November, 6,100 more than a year ago.
The average FTB loan-to-value rose to 81.3 per cent, the highest since September 2011, in a sign of the increased availability of mortgages as banks become more willing to lend to those with smaller deposits. As a result the average deposit size fell to £27,942, a 3.4 per cent fall in the past three months, attracting more aspiring buyers back into the market.
Deposits consequently now represent a smaller proportion of first-time buyer incomes, with the average deposit of a new buyer equalling 76.6 per cent of annual income, a 5.8 per cent fall over the course of the last twelve months.
The increase in first-time buyer activity has also been fuelled by the improved affordability of mortgages. In November the average mortgage rate fell to 3.93 per cent, down 0.8 per cent since last year, with banks having being able to pass cheap credit from Funding for Lending onto borrowers.
But there are warning signs ahead, with rising house prices potentially threatening to price the next wave of first-time buyers out of the market. The average purchase price for a first-time buyer rose by 11.4 per cent year-on-year in November, and now stands at £149,403 – up £15,340 in the last twelve months.
Similarly, although the cheaper rates meant that mortgages were more affordable for first-time buyers, the proportion of income represented by mortgage repayments is starting to creep up as house prices rise.
Mortgage repayments have increased 0.1per cent in the past month and 0.4 per cent over the past three months, despite consistently falling mortgage rates.
David Newnes, director of LSL Property Services, owners of estate agents Your Move and Reeds Rains, said: “There has been a revival in the first-time buyer market over the past twelve months, with sales increasing by nearly a third. Mortgages are much more affordable, while banks have equally been far more prepared to lend to those with smaller deposit sizes.
“However there is a flipside to the coin. Prices are rising and there is simply not enough housing stock to match continued demand, meaning this will continue well into 2014. If demand is not satisfied by supply, then sustainable growth will be hampered and future first-time buyers will once again be left out in the cold. We need far more homes, particularly at the lower end of the spectrum if we are to sustain a healthy property market.”
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