First-time buyers were able to raise more money for deposits in January using the cash stamp duty changes had freed up.
The average first-time buyer deposit reached £29,127 in January, the highest amount in 18 months (July 2013) and up by 15.1 per cent from January 2014, the latest research from Your Move and Reeds Rains shows.
Revisions to the stamp duty slab system have reduced the upfront costs for many first-time buyers, allowing them to divert that cash into a deposit fund. First-time buyers paying the average purchase price would have been liable for stamp duty fees of around £1,600 before the graduated system was implemented, but this would now have been reduced to £700 – saving them roughly £900, Your Move and Reeds Rains said.
At the same time, loan-to-value has dropped on first-time buyer mortgage deals – to 81.8 per cent in January 2015, from 82.4 per cent in December 2014 and 82.3 per cent in January 2014. This reflects the recent increase in real wages.
Despite this, the average loan-to-income ratio for first-time buyers has risen on an annual basis. On average, deposits now represent 75.4% of a first-time buyer’s income, compared to 70.6% a year ago.
Adrian Gill, director of estate agents Your Move and Reeds Rains, comments: “A fusion of economic factors is alleviating some of the financial burden of forming a deposit. Wages are starting to recover and inflation has fallen to a record low, meaning buyers have slightly more cash to play with day-to-day. And stamp duty fees were slashed for many new buyers when the government reformed the old slab system, freeing up further funds. It’s still difficult to save – with savings rates tied closely to the low base rate. But it’s easier to put cash aside than it was a year ago.
“However, property prices have pushed a new record for first-time buyers, meaning these extra funds are being diverted directly into larger deposits. Putting together a deposit to buy a property remains one of the most arduous tasks for prospective home-buyers, and schemes like Help to Buy are essential to allow the swathes of buyers reliant on higher LTV mortgages to get onto the housing ladder.”
First-Time Buyer Affordability
|
Average deposit |
Deposit as proportion of income |
Average mortgage rate |
Mortgage repayment as proportion of income |
|
| January 2015 |
£29,127 |
75.4% |
3.70% |
20.8% |
| December 2014 |
£27,278 |
70.6% |
3.70% |
20.2% |
| 1 month change |
+6.8% |
+4.8 |
-0.01 |
+0.6 |
| 3 month change |
+15.5% |
+9.4 |
-0.48 |
+0.1 |
| 1 year change |
+15.1% |
+4.8 |
-0.40 |
-0.2 |
London continues to lead the housing price charts with an average deposit size of £73,711 – by far the greatest amount of any UK region. This was more than ten times the size of the average first-time buyer deposit in Wales (£7,032).
| Region |
Average Purchase Price |
Average deposit |
Average mortgage |
Number of FTBs* |
| London |
£308,067 |
£73,711 |
£234,356 |
11,500 |
| South East |
£206,204 |
£30,063 |
£176,141 |
15,300 |
| East of England |
£171,280 |
£26,377 |
£144,903 |
2,700 |
| UK |
£154,606 |
£24,759 |
£129,847 |
72,600 |
| South West |
£149,097 |
£21,197 |
£127,900 |
5,900 |
| West Midlands |
£132,456 |
£22,478 |
£109,979 |
5,800 |
| East Midlands |
£132,103 |
£22,144 |
£109,960 |
5,100 |
| North West |
£124,485 |
£19,484 |
£105,001 |
6,900 |
| Yorkshire & Humber |
£117,251 |
£17,796 |
£99,455 |
5,700 |
| North East |
£116,477 |
£19,200 |
£97,277 |
2,800 |
| Scotland |
£106,471 |
£14,980 |
£91,491 |
6,500 |
| Wales |
£104,496 |
£7,032 |
£97,464 |
2,800 |
| Northern Ireland |
£90,241 |
£11,671 |
£78,570 |
1,700 |
“Prices have cooled slightly at the very peak of the London market, but the same isn’t true at the bottom end. First-time buyer demand remains strong, boosted by an insatiable appetite for homes. The lure of London as a culture capital and professional hub continues to attract buyers in from other areas of the country, and indeed from other countries – despite the higher average price tag,” Gill said.
