First-time buyer numbers take a tumble

First-time buyer transactions fell by 3.7% to 18,300 in August after a stronger June and July, returning to their August 2011 level.

The figures are from LSL, owners of Reeds Rains and Your Move.

Despite the dip in transactions, the average loan-to-value rose from 78.9% to 81.5%, the highest since July 2011. As a result, the average deposit size fell to £26,285, 8% lower than in July as lenders showed signs of relaxing deposit requirements for select borrowers.  

While first-time buyer house prices rose by 4.7% to £141,918 in August, the affordability of both deposits and mortgage repayments improved on a monthly basis as the average income of a first-time buyer rose.

Deposits in August represented 73% of the average first-time buyer’s annual income, down from 81.7% in the previous month, while mortgage repayments accounted for 22.2%, down from 23.4% in July.

On an annual basis, the affordability of the average house purchase deposit improved slightly, with deposits representing 0.6% less of a buyer’s annual income. Mortgage payments are slightly less affordable than a year ago, climbing from 21.6% of a first-time buyer’s income as a result of larger mortgage advances. The average mortgage repayment rate for first-time buyers rose to 4.8% in August from 4.6% a year ago.

David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, said: “There are encouraging signs that lenders are relaxing deposit requirements, but it’s not translating into increasing first-time buyer purchases.

“Lending criteria remains incredibly stringent, and lenders are cherry-picking those new buyers with the very cleanest credit histories and largest incomes, limiting the number of buyers able to take advantage of deals with the very highest LTVs.

“We may be seeing lenders begin to react to the Funding for Lending scheme – but it’s crucial that cheaper finance reaches a much broader selection of new buyers to boost buyer activity and alleviate the pressure on the private rented sector.”

In a separate report by the Centre for Economics and Business Research on behalf of lender HSBC, parents are said to have helped finance over 100,000 first-time buyers since the financial crisis began.

Between 2008 and 2011, the total value of first-time buyer transactions in the UK fell from £30.2bn to £28.5bn.

In the last year alone, £5.3bn worth, or 18.7%, of all first-time buyer transactions would never have taken place without family financing, according to the HSBC/CEBR report’s estimates.

Daniel Solomon, chief author of the report, said: “Mortgage lending to first- time buyers fell off a cliff during the financial crisis. To some extent, families have moved in to fill the gap.”