First time home buyers resilient despite seasonal dip in property market

The costs of buying and owning a first home have remained broadly stable in February, with lower bor

The costs of buying and owning a first home have remained broadly stable in February, with lower borrowing costs balancing larger prices and deposits - Credit: Archant

Underlying growth defies a seasonal dip which sees first time buyer numbers dip by 1.4 per cent on a monthly basis. But costs remain steady, despite deposits now consuming almost three-quarters of average buyer income.

Numbers of households purchasing their first home has grown by almost 7 per cent annually, according to the latest First-Time Buyer Tracker from Your Move & Reeds Rains.

The total monthly volume of first-time buyer transactions stands at 21,100, as of February, representing a rise of 6.6 per cent on February 2015’s figure of 19,800. The month also saw a slight seasonal dip, with the number of completed first-time buyer property transactions falling by 300 – or 1.4 per cent – between January and February.

However, on a seasonally-adjusted basis, February’s figure is considerably higher at 25,900, just 500 below January 2016’s seasonally adjusted total of 26,400, and represents 100 more first time buyers than the seasonally adjusted average (25,800) for the period between January and December 2015.

Adrian Gill, director of estate agents Your Move and Reeds Rains, comments: “February is a traditionally quiet period for the first-time buyer market. The month sits awkwardly between the New Year property market rush and the spring-summer activity high. However, beyond that seasonality, these figures demonstrate the strong, steady underlying growth that comes with growing first-time buyer confidence.

“This optimism may begin to reveal itself more clearly in March, when an Easter uplift may sweep away any residual doubts among some first-timers. While the more general mismatch between buyers and sellers will continue to exert upwards pressure on prices, a combination of pluck and poise from first-time buyers will ensure that this does little to impact the overall trend of growing demand at this end of the market.”

The costs of buying and owning a first home have remained broadly stable in February, with lower borrowing costs balancing larger prices and deposits. February’s average mortgage rate also represents the lowest mortgage rate for first-time buyers in over five years.

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In addition, in February the average purchase price for a first-time buyer home stood at £168,539, an increase of £21,320 – or 14.5 per cent – on February 2015’s average of £147,219. However, over the same twelve-month period, the average size of a first-time mortgage grew from £121,534 to £139,088 – an increase of 14.4 per cent.

Larger deposit costs represent the other side to this balance of affordability. In February the average deposit put down by a first-time buyer stood at £29,451 – an increase of 14.7 per cent, or £3,766, on an annual basis.

Adrian Gill continues: “First-time buyers have had the benefit of some favourable February conditions. While those setting a first foot on the ladder this month have had to shell out more in terms of headline prices – as they seek to compete with buy-to-let investors for small, affordable homes – mortgage lending has easily kept pace. Equally, although many first-time buyers will baulk at the rising deposit costs, there is a silver cloud to this grey lining. Larger deposits tend to indicate growing incomes and larger mortgages, meaning an impressive number of first-time buyers are accessing the capital to purchase a first home, even in a sellers’ market.

“In addition, the fundamentals are still there for aspiring homeowners to realise their dreams. The average mortgage rate remains competitive and the lending market is still very supportive towards those taking their first step into the property market. The coming months will test whether first-time buyers feel ready to seize that support as vigorously as they did last year.”