Are first time buyers better off, or not, than those in 2007

publication date: Jan 8, 2015
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author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

What's happening to first time buyers?

Latest reports are starting to come through on the first time buyer market for 2014.

According to Halifax, the number of FTBs were at their highest in 2014 for the last seven years – since the credit crunch began. The report shows:

  1. Nearly a quarter increase in FTBS in 2014 versus 2013

  2. Since 2012, the number of FTBs climbing the housing ladder has increased by 50%

  3. Based on research, the new stamp duty changes will save the average FTB £781

These are interesting stats, particularly with an election coming up as they will impact on the party politicians ability to be able to deliver. The Conservatives hope to house another 100,000 FTBs in properties with up to 20% discounts applied, while Labour have arbitrarily said they want to increase the number of FTBs by 30% - based on what number though?

The interesting figure is the 50% increase since 2012. The number of all buyers (first timers, investors, people trading up and down) fell by 50% since 2007, so this is a real recovery figure for the market. And FTBs make up a substantial share of the market now, with 46% of purchases going to FTBs (if the buyer takes out a mortgage). As up to a third of sales are now cash, this doesn’t mean FTBs account for nearly half of the market, but half of half of homeowners – ie around 25%.

Despite fears of affordability squeezing, lower interest rates have meant huge falls in the cost of a mortgage, with first time buyers paying approximately 30% of their disposable earnings on their mortgage. In 2007, this went as high as 50%!

And the news gets better, because many FTBs have bought in before property prices have recovered to their height, coupled with driving the availability of 95% mortgages through the Help to Buy Scheme, the average FTB desposit was just under £30,000. That’s 7% less than they paid out in 2013.

Now £30,000 sounds a heck of a lot of course, but remember it’s very skewed by Londoners who are insisting on still paying an average 25% deposit on a property, which in this market is over £70,000. For many outside of London, deposits of £5,000 to £10,000 are more of the ‘norm’.

Craig McKinlay, Mortgages Director at Halifax, commened:

"First-time buyers are vital for a properly functioning housing market. Improving economic conditions and rising employment levels have boosted confidence among those thinking about getting on to the housing ladder for the first time, contributing to the significant increase in the number of first-time buyers in the past two years. Record low mortgage rates and Government schemes such as Help to Buy have improved affordability, enabling more first-time buyers to buy their own property.”                                                                         

How do the Stamp Duty changes affect First time Buyers?
What is great news is the changes in the stamp duty mean just over 40% of FTBs pay no stamp duty whatsoever, while 47% bought properties priced between £125,000 and £250,000, meaning some great savings. Londoner first time buyers though continue to be disadvantaged, with 56% paying more than £250,000, but still some great stamp duty savings up to £300,000 versus the ‘old system’.

Update: As of November 2017, first-time buyers will pay no stamp duty on properties costing up to £300,000 and for properties costing up to £500,000 no stump duty will be payable on the first £300,000.

Halifax say more areas are affordable for first time buyers now with 26% all of local authorities across the UK matching average house prices to average earnings, based on the long-term average of a property price being 4x your income.

When borrowing money, about a third (31%) had a loan to value ratio of 90% (ie put down £10,000 or less) and they tend to be buying at a lot lower age than is mentioned in many reports. The average age of people buying with a Halifax mortgage for first time buyers is 30 years old, not surprisingly up on 2011 (29 years) as the market hadn’t recovered then and regionally, FTBs aren’t even that much older in London – 32 years.

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Which? Property books and one of the UK's top property experts.
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