Number of first-time buyers in 2014 at highest since 2007

The number of first-time buyers (FTBs) increased by more than a fifth in 2014, according to the annual Halifax First Time Buyer Review.

Last year the number of first-time buyers grew by an estimated 22%; similar to the 23% rise in 2013. This was the third successive annual increase with a 50% rise in the past two years.

There were an estimated 326,500 FTBs in 2014, up from 268,500 in 2013. This was the highest annual total since 2007 (359,900), and was 70% higher than in 2008 (192,300). FTBs increased their share of all house purchases made with a mortgage, accounting for 46%1 in 2014, up from 44% in 2013.

Mortgage affordability has improved significantly in recent years. The proportion of disposable earnings devoted to mortgage payments by a first-time buyer stood at 32%2 in 2014 Quarter 3. This is a substantial improvement compared with the summer of 2007 when this figure reached a peak of 50%. Record low mortgage rates have been a major contributing behind this improvement.

Fall in the size of the average deposit. The average FTB deposit in 2014 was £29,218; 7% lower than in 2013 (£31,582). This decline was primarily due to the greater availability of loans requiring a relatively small deposit during the past year. Nonetheless, the average deposit is still £11,718 (67%) higher than in 2007 (£17,499).

Craig McKinlay, Mortgages Director at Halifax, commented: “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 such as Help to Buy have improved affordability, enabling more first-time buyers to buy their own property.”

Nearly six in ten FTB purchases are now above the £125,000 Stamp Duty threshold. The proportion of FTBs exempt from paying stamp duty fell to 41% in 2014 from 45% in 2013. Almost half (47%) of properties bought by FTBs were priced between £125,000 and £250,000. Nationally, only 13% of FTB purchases were above £250,000 in 2014. There were, however, considerable regional differences with more than half FTBs in Greater London (56%) paying more than £250,000.

The recent changes to the stamp duty system have saved the average FTB £781, reducing the tax bill for the average priced FTB property of £171,870 from £1,718 to £937.

Additional Key Findings

Affordability

Larne in Northern Ireland is the most affordable local authority district (LADs) in the UK with an average property price of £80,793; 2.8 times local average gross annual earnings. East Ayrshire and Inverclyde are the next most affordable (also 2.8). Seven of the 10 most affordable LADs for first-time buyers are in Scotland.

Unsurprisingly, all ten least affordable LADs are in London. The least affordable is Camden where the average first-time buyer’s property price of £614,315 is 11.4 times gross average annual earnings in the area.

There has been an increase in the proportion of areas that are affordable for FTBs since 2007. In a quarter (26%) all of local authority districts (LADs) in the UK the average house price paid by a first-time buyer in the 12 months to November 2014 was affordable for someone on average earnings – based on the ratio of the average house price to earnings being below the long-term average of 4.0. This compares to the peak of the market in 2007 when just 5% of LADs were affordable.

Deposits

The average deposit, as a proportion of the purchase price, fell from 20% in 2013 to 17% in 2014. It, nonetheless, remains significantly higher than in 2007 (10%).

The volume of lending to FTBs at a loan to value ratio of 90% and above increased from 26% in 2013 to an estimated 31% in 2014.

FTBs in Greater London put down the largest average deposit, at £78,823. FTBs in Northern Ireland put down the smallest average deposit, at £16,763.

Prices

The average price paid by FTBs increased by 9% in 2014, from £157,911 to £171,870; just 2% lower than in 2007.

The average price paid by first-time buyers is highest in Greater London (£323,333); more than £100,000 higher than the next most expensive region, the South East (£212,635). With an average price of £100,320, Northern Ireland is the least expensive region in the UK to get on the bottom rung of the housing ladder.