By Daniel Hunter
Monthly first-time buyer sales have hit a post-recession record, according to the latest First Time Buyer Tracker from Your Move and Reeds Rains.
July saw 29,700 first-time buyers complete property transactions, the highest since August 2007 before the financial crisis. However, sales still lag more than 6,000 behind the pre-crisis peak. This month’s figure also represents a 28% rise on April 2015’s number (23,200), amounting to a 6,500 increase over the last three months, as well as a 4.9% month-on-month uptick on June’s figure of 28,300.
The news comes despite the rising immediate costs of buying a home. The average first-time buyer deposit in July totalled £27,975, marking a 10% increase on July 2014’s figure of £25,429. In cash terms, this equates to a rise of £2,546. The cost of a deposit as a proportion of a first-time buyer’s average income reached 71.6% in July, surging 3.1 percentage points in one month alone and rising 5.4 percentage points from 66.2% a year ago.
Equally, the average first-time buyer Loan to Value ratio (LTV), which represents the proportional size of an individual’s loan compared to the value of the property they are buying, is steadily dropping. This means first-time buyers are having to pay more up-front, in the form of larger deposits. July’s rate, 82.7%, represents a 0.5 percentage point decrease on LTVs in June and a 0.2 point decrease on a year ago, as the size of the average deposit rises.
A similar picture emerges in the latest Mortgage Monitor from e.surv. The data revealed a decline in the number of small-deposit loans given approval in July, dropping 5.9% compared to June and 7.1% compared to July 2014.
Adrian Gill, director of estate agents Your Move and Reeds Rains, said: “First-time buyers are experiencing a summer of white-hot activity, unimpeded by rising deposit costs. The post-General Election bounce has given way to a more stable optimism, as first-time buyers realise that the property market — at least their end of it — is at no immediate risk of being tampered with by the Government. Rather, incentives attractive to first-time buyers — such as the Help to Buy scheme — are running along steadily, while further low-cost housing development is being encouraged to entice more people onto the ladder.
“This month’s particularly high transaction rate is also partially due to expectations that the Bank of England may announce a rate rise sooner rather than later. The thought of months of rock-bottom mortgage rates being brought to an end is encouraging many wavering first-time buyers to jump on the property ladder before repayment costs shoot up. Some may have held back briefly when considering the rising deposit costs. But real wages have been growing too, and first-time buyers are able to shoulder the short-term burden of a slightly higher deposit to spare the risk of losing out on a good mortgage deal.”