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First-time Buyer Numbers Reach 7-year High

Number of first-time buyers at highest level since before the credit crisis - but average deposit still almost £30,000.

Zoopla earlier last week released an article stating the number of first time buyers has reached a seven year high in 2014.

According to mortgage lender Halifax, there were a total of 326,500 people who bought their first home during 2014, which is the highest number since the credit crises struck in 2007 and a further 70% up on 2008. The Halifax Group said that first time buyers were 22% higher than in 2013 and 50% up on two years ago with first time buyer numbers increasing for the third consecutive year.

Overall, first-time buyers accounted for 46% of all homes purchased with a mortgage.

Halifax attributed the increase in people buying their first home to a combination of the improving economy, record low interest rates and Government schemes, such as Help to Buy. Halifax stated mortgage affordability had increased significantly in recent years, with the typical first-time buyer spending just 32% of their disposable income on repayments during the third quarter of 2014, down from a peak of 50% in the summer of 2007.

Decline in Mortgage Deposits

At the same time, there has also been a 7% fall in the size of the average deposit put down by someone buying their first home, with this dropping to £29,218 last year, down from £31,582 in 2013. The decline was largely due to an increase in the number of mortgages available for people with only small deposits, with nearly a third of first-time buyers borrowing 90% or more of their property’s value. But despite the improvement, first-time buyers are still putting down an average of 67% more than they were in 2007, when deposits were typically £17,499.

The average price paid by someone purchasing their first home rose by 9% during the year to stand at £171,870, just 2% lower than in 2007. Unsurprisingly, first-time buyers in Greater London paid the most at an average of £323,333 – more than £100,000 more than those in the next most expensive region, the South East, where typical first homes cost £212,635.

Craig McKinlay, mortgages director at Halifax, said: “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 have improved affordability, enabling more first-time buyers to buy their own property.”

Stamp Duty Changes

In 2014, 41% of first-time buyers were exempt from Stamp Duty, while 47% bought properties for between £125,000 to £250,000, meaning they fell in the 1% band. The recent Stamp Duty change will save the typical first-time buyer £781, reducing the tax bill on the average £171,870 property from £1,718 to £937.

Shared Ownership can help many first time buyers

The Shared Ownership product helps many first time buyers get a foot on the housing ladder like Help to Buy. Buying a home in the current market can be very difficult for many people. Shared Ownership makes it possible to buy a property which otherwise would not have been affordable. You can usually buy an initial share of 30% to 75% of the value of a property, and you’ll need to take out a mortgage to pay for your share of the home’s purchase price. You will then pay a subsidised rent on the share you don’t buy, and there will also be a monthly service charge payable.

Buying a share in a property means you will often require a much smaller deposit than if you were to buy outright which can be the biggest barrier onto the property ladder for first time buyers. The Shared Ownership product is also only available to people who do not currently own a home, aimed at helping first and foremost first time buyers.

Read more about the increase in first time buyers on Zoopla.