First-time-buyer transaction levels fell back to 2011 standards in August, following strong a strong June and July.
According to LSL Property Service’s First-time-buyer Monitor, activity fell 3.7 per cent to 18,300, down from 19,000 the previous month, but around the same as August 2011.
However, the average loan-to-value (LTV) rate rose from 78.9 per cent to 81.5 per cent, the highest since July 2011 and the average deposit size fell to £26,285, 8 per cent lower than in July.
Both statistics suggest that lenders are showing signs of relaxing deposit requirements for select borrowers.
While first-time buyer house prices rose by 4.7 per cent to £141,918 in August, the affordability of both deposits and mortgage repayments improved on a monthly basis as the average income of a first-time-buyer rose.
Deposits in August represented 73 per cent of the average first-time-buyer’s annual income, down from 81.7 per cent in the previous month, while mortgage repayments account for 22.2 per cent, down from 23.4 per cent in July.
On an annual basis, the affordability of the average house purchase deposit improved slightly, with deposits representing 0.6 per cent less of a buyer’s annual income.
Mortgage payments are slightly less affordable than a year ago, climbing from 21.6 per cent of a first-time-buyer’s income as a result of larger mortgage advances. The average mortgage repayment rate for first-time-buyers rose to 4.8 per cent August from 4.6 per cent a year ago.
LSL Property Services commercial director David Brown said: “There are encouraging signs that lenders are relaxing deposit requirements, but it’s not translating into increasing first-time-buyer purchases.
“In fact, following a seasonal drop-off in August, first-time-buyer numbers are back to their level of a year ago. Lending criteria remains incredibly stringent, and lenders are cherry-picking those new buyers with the very cleanest credit histories and largest incomes, limiting the number of buyers able to take advantage of deals with the very highest LTVs.
“We may be seeing lenders begin to react to the Funding for Lending Scheme – but it’s crucial that cheaper finance reaches a much broader selection of new buyers to boost buyer activity and alleviate the pressure on the private rented sector.”
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