In a welcome boost for housebuilders, the number of buyers getting on the housing ladder exceeded 300,000 for the third year in a row, thanks to low mortgage rates, high levels of employment and various government schemes.
“First-time buyers play a crucial role in the housing market, and each transaction has an impact further up the chain, as well as helping to drive levels of housebuilding,” Martin Ellis, Housing Economist at Halifax, said.
The number of first-time buyers is estimated to have reached 335,7501 in 2016, according to the latest Halifax First-Time Buyer Review. First-time buyer numbers have grown from 312,900 in 2015 to an estimated 335,750 in 2016, a rise of 7.3% – the highest level since the start of the financial crisis in 2007.
Having reached an all-time low of 192,3002 in 2008, the number of homebuyers getting on to the first rung of the property ladder has grown by 75% to its current level. However, first-time buyer numbers still remain 17% below the immediate pre-crisis peak of 402,800 in 2006.
In 2006 just over a third (36%) of all house purchases financed by a mortgage were made by first-time buyers. In 2016, this proportion is estimated to have reached almost half (49%), the highest level since 1996. In the past year, this share has risen from 46%.
Average price and average deposit paid by first-time buyers reach new highs in 2016
The average first-time buyer deposit has more than doubled over the past decade from £15,168 in 2006 to £32,321 in 2016 – an increase of 113%.
Four regions (all in southern England) have seen at least a doubling in the average deposit put down.
In London the average deposit by new entrants to the housing market has grown four-fold in the past decade, from £26,701 to £100,445 – an increase of 276%.
Other regions to see a sharp rise in the average deposit include the South East where it has grown to £47,472 (an increase of 173%), the South West – up to £34,306 (or 130%) and the East – up to £31,864 (+122%).
By comparison, first-time buyers in Northern Ireland have fared the best with average deposits falling by a fifth (20%) from £20,834 in 2006 to £16,695 – the lowest in the UK.
The average national deposit of £32,321 is equivalent to 16% of the average price of a typical first-time buyer home, having fallen from 25% in 2009. Meanwhile, a decade ago, the average deposit had been as low as 10%.
In 2016 the average house price paid by first-time buyers was £205,170 – the highest on record. Since falling to £135,254 at the height of the housing downturn in 2009, the average price paid by firsttime buyers has grown by 52%. In the past year, this average has grown from £191,929, an increase of 7%.
In London, first-time buyers have seen the average price rise by 81% (or £180,273) since 2009 to £402,692 – the highest on record. Not only is the average price in London three and a half times higher than in Northern Ireland (£115,269) – it is also £130,000 higher than the second most expensive region, the South East (£272,777).
As house prices for a typical first-time buyer home have risen, there has been a growing trend towards mortgage terms longer than the more traditional 25-year term. In 2006, two-thirds (64%) of first-time buyers had a mortgage term of between five and 25 years, whilst the remaining 36% were over 25 years.
In 2016, this mix has markedly reversed, with 60% of mortgages at a term of 25 years or more, while the five and 25-year mortgage terms have fallen to 40%.
In 2016, 28% of all first-time buyers with a mortgage opted for a 30 to 35-year term, a share that has grown sharply from 11% in 2006. On the other hand, the share of 20 to 25-year mortgage term has fallen from 53% to 28% during the same period. The proportion accounted for by 25 to 30-year terms has also grown from 22% to 28%.
The proportion of disposable earnings devoted to mortgage payments by a first-time buyer stood at 32% in 2016 Quarter 3; this is in line with the long-term average (since 1983) of 33%. This is a substantial improvement since summer 2007 when this figure reached a peak of 50%.