Overall first time buyer volumes grew by 47.7% on a monthly basis and as well as cheaper prices the burden of deposit costs and mortgage payments dipped, the data from the Your Move and Reeds Rains report shows.
This means that, between February and March, the total flow of buyers managing to step foot on the ladder for the first time grew by 10,500 and on an annual basis, the total number of first time buyers in March grew by 34.9% compared to March 2015.
Adrian Gill, director of estate agents Your Move and Reeds Rains, pointed out that while much was made of March being the month of the buy to let landlord and the second home buyer due to the April deadline for additional stamp duty, the surge was not at the expense of the bottom rungs of the ladder.
He believes that a continuation of the broadly positive economic climate has likely been a factor spurring would-be first time buyers. ‘However, what’s really getting those numbers up is the fact that the range of support options available to first time buyers is at last beginning to be recognised and utilised,’ he said.
‘The Help to Buy scheme is assisting those with limited capital recognise their dreams, while the Government’s offer of cut price homes for first time buyers is easing supply in a part of the market that typically struggles to match roaring demand with constrained supply,’ he added.
The data also shows that March has seen a lightening of home ownership costs and the charges associated with it. The average purchase price paid by first time buyers in March stood at £166,559, down 1.2% in absolute terms compared with February which previously marked the highest average price on record. But on an annual basis, the average purchase value of a first time buyer property rose by 9.2%.
Deposit and monthly mortgage payment costs also declined. First time buyer deposits averaged £28,233 in March, down 4.1% compared with the previous month. In addition, the proportion of an average first time buyer’s monthly income that is consumed by deposit costs fell 3.1% between February and March from 74.9% to 71.8%.
Meanwhile, over the same period, monthly mortgage payments accounted for a steadily decreasing amount of average first time buyer income, falling from 20.4% of monthly income in February to 20.3% as of March.
Besides the falling costs of home ownership, lending conditions for firs time buyers have remained favourable. The average loan to value (LTV) ratio reached 83% in March, marking a 0.5% uptick on the previous month, meaning first time buyers will be able to borrow more against the value of the home they wish to purchase.
The average first time buyer mortgage rate continues to fall, dropping from 3.14% in February to 3.13% in March. Equally, the size of the average first time buyer mortgage remains large standing at £138,326 in March. While the figure marks a 0.5% dip on February’s figure of £139,088, it also represents an increase of 8.6% on March 2015’s average of £127,327.
‘With a combination of high LTV lending and low mortgage rates, securing the finance for a first home is within the reach of many. There are also encouraging signs that rising home values are beginning to cool. This is partly a result of the Government backed affordable home scheme increasing supply at the lower end of the market and partly an indication that those setting foot onto the ladder are toughening up their act by driving harder bargains with vendors or finding good value locations in which to become a home owner,’ said Gill.
‘While deposit costs are considerable and continue to consume a large chunk of first time buyer income, there are signs that the financial burdens they impose are gradually lightening. As wages steadily rise and inflation remains very low, many first-time buyers are finding that, in real terms, they are getting better off. So, even if deposit levels aren’t quite falling at the rate many would like to see, those looking to own a home for the first time are finding that the economic climate is making them better able to carry the cost,’ he explained.
A breakdown of the figures show that in London the average value of a first time buyer property hit £321,247 in the three months to March 2016. The South East is the second most expensive region, with average first time house prices at £214,574 over the same period.
Conversely, the North East and Northern Ireland rank as the least expensive regions for first time buyer properties. Average first time buyer property values stand at £113,909 in the North East and £99,298 in Northern Ireland. Across the UK, the average price for a first home stood at £154,889 in the three months to March 2016.
On average, Londoners put down by far the largest deposit of any region in the three months to February 2016 at £73,676, more than five times the size of the average first time buyer deposit in Wales at £12,872. The second largest deposits are paid by South Eastern first time buyers, who paid an average of £39,663 to secure their first home in the three months to March 2016. Nationwide, the average first time buyer paid out £25,270 in deposit costs.
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