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First-time buyer market share ‘stable’ despite rising prices

The proportion of first-time buyers taking out a mortgage has remained stable year-on-year despite increases in the average price and deposit, according to research by Halifax.

The bank’s analysis of UK Finance data estimated first-time buyers made up 50 per cent of all home purchase loans last year, compared to 51 per cent in 2019.

The proportion of first-time buyers purchasing with a mortgage remained stable despite the average price they paid reaching £256,057 last year, an increase of 10 per cent from 2019.

The average deposit paid by a first-time buyer also increased by almost a quarter (23 per cent) to £57,278 last year, compared to £46,449 in 2019.

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However, with the housing market effectively closed during the first national lockdown, the overall number of first-time buyers fell to 304,657 in 2020, down 13 per cent compared to the previous year.

YearNumber of first-time buyersAnnual changeFTBs as percentage of all home purchase loans
Sources: UK Finance and *Halifax estimate for 2020

The property market re-opened in the second half of 2020 but first-time buyer transactions were also down during that period, but only by 2 per cent when compared to 2019.

Halifax noted that first-time buyer transactions had bounced back “strongly” in the second half of last year by 52 per cent, from 121,050 in H1 to 183,607 in H2, following the reopening of the housing market from May.

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Russell Galley, managing director at Halifax, said: “Whilst these figures confirm the almost inevitable fall in the overall number of first-time buyers in 2020 – with the entire housing market effectively shuttered during the first national lockdown – they also underline just how strong the bounce back was in the second half of the year.

“Despite the obvious challenges presented by soaring house prices, not least the need to raise an even bigger deposit, first-time buyers still accounted for half of all home purchases, a reassuring statistic given their overall importance to the market.”

Luke Spellman, financial adviser at Spellman Financial Services, said it was unsurprising that the average first-time buyer deposit had increased.

He said: “This will mainly be down to mortgage lenders hiking the minimum deposit required from 5 per cent to 10-15 per cent for the best part of last year.”

The number of 95 per cent LTV mortgages has dropped dramatically during the pandemic.

Data from Moneyfacts showed there were eight products available at 95 per cent LTV at the start of December, around 2 per cent of the number available at the beginning of March (391) before the first national lockdown.

By Chloe Cheung

Source: FT Adviser

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Consumer confidence in housing market falls – BSA

Consumer confidence in home purchase has dropped in September, with the BSA’s Property Tracker Index¹ at -4%, down on June’s figure of -1%.  The UK Public has now been net negative about the time being right to buy a new home, for 6 consecutive quarters.

Following the modest increase in the Bank Rate from 0.5% to 0.75% in August it is clear that the cost of monthly mortgage repayments is of increasing concern.  Overall, 48% of consumers saw this cost as a barrier to home ownership, up from 44% in June 2018.  The last time this number of consumers rated monthly repayments as a barrier was back in June 2014 (49%).

Commenting, Paul Broadhead, Head of Mortgage & Housing Policy at the BSA said:

“Consumer negativity on home purchase is borne out by a mortgage market which remains subdued.  The only area of mortgage lending which has seen any growth this year is the re-mortgage market.  This has been in part driven by borrowers looking to fix their mortgage rates as Bank Rate rises.   Now there is evidence that fixed rate periods are starting to rise with borrowers looking to secure their repayments before the Bank Rate rises again.

“Uncertainty about Brexit – deal or no deal – is dampening the volume of property purchases, with many of those who can delay doing so.  High house prices in some regions are still a huge issue, especially for first time buyers, and more than a third of consumers (36%) still believe that prices will rise in the next 12 months.  That should be set against 22% who believe that they will fall.

“Whichever way prices go, raising the necessary deposit has not diminished as a material barrier to owning your own home – the majority of consumers (65%) say that it is the most significant barrier that they face.

“Help to Buy: Equity Loan has been an important feature in the market for 5 years and has helped 170,000 buyers, both first time buyers and so-called second steppers.  Rumours that it is under review has caused some to demand that it becomes a permanent feature of the market and others for it to changed or be withdrawn.

“The fate of this scheme after 2021 was always going to be difficult, but in my view it should not become a permanent part of the market. Tapering it down could be one option. When Help to Buy (Scotland) was launched in 2013, it had a price cap of £400,000, this has been reduced £230,000 allowing more people to benefit from the available funding and targeting it at lower income families and first-time buyers. Another option could be to reduce the equity loan available from 20% to a lower amount.

“To sensibly manage the change, investors, lenders, developers, mortgage intermediaries and of course consumers, will all need time to adapt to a world without direct Government support. Now would be the time for the Government to make its intentions for the future of Help to Buy: Equity Loan crystal clear.”

Source: Politics Home