New research published by Halifax suggests that the number of first-time buyers taking out a mortgage fell for the first time in four years in 2015.
Although the decline is just 0.5% on the previous year – from 311,700 in 2014 to 310,000 in 2015 – it signals the first drop in first-time buyers in the UK since 2011. According to Halifax, a lack of homes available to purchase is partly to blame for the decline.
Prices on the rise
While the number of first-time buyers fell in 2015, the amount they paid for their first homes shot up by 10% to an average of just over £190,000. In Greater London, however, the average price paid for a starter home was nearly double that, shooting up to just under £368,000. In contrast, starter homes sold in Northern Ireland for an average of £108,000 – less than a third of the cost in the capital!
In Scotland and Wales, first-time homes cost an average of £133,000 and £125,000 respectively.
The rise in prices is fuelled by a lack of supply of suitable home to buy, which is driving competition between first-time buyers.
Interestingly, the rise in house prices seems to be having an effect on the length of the mortgages taken out by first-time buyers, as more and more opt for mortgage terms that last longer than the traditional 25 years. Where just 16% of first-time buyers took out a lengthier 35-year mortgage term in 2007, over a quarter (26%) of first-time buyers chose this route in 2015.
Counting the pennies
The research also suggested that the average deposit required for a first home rose by 13% to just shy of £33,000 – up from the average of £29,000 in 2014.
However, in London, the average deposit required is a full three times higher than the rest of the UK, at a huge £91,000. When compared with the lowest average deposit, Northern Ireland’s £16,578, London’s average is over five times the size.
Where the average deposit secured on a property by first-time buyers across the UK was 17%, those in London put down around 25% of the property’s value on average.
Although there was a slight decline in first-time buyers in 2015, the figure is still much larger than was witnessed in 2011, with a 60% increase on the 193,700 first-time home buyers seen four years ago.
If you’re trying to save for your first home, you may be able to get help from the Government. The Help-to-Buy ISA*, launched in December 2015, could help by boosting your savings by 25%. Meanwhile, the Government is set to extend their help-to-buy scheme to London in February, allowing first-time buyers to purchase a new home with just a 5% deposit.
Avg. house price
Deposit as % of purchase price
Yorkshire and the Humber
Whole of UK
*It was reported in August 2016 that the government bonus on Help to Buy ISAs cannot be included in the initial deposit on a home, but is paid once the sale has completed. Find out more here.
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