First-time buyer numbers fall as affordability constraints bite

New data for June has revealed a fall in the number of first-time buyers, according to the Council of Mortgage Lenders.

The number of loans to first-time buyers declined to 35,600 - somewhat lower than the 39,800 loans in June last year. Although this figure is up slightly on the 34,600 first-time buyer loans in May, it is the lowest June figure since 2004 when there were just 33,600 first-time buyers getting on the property ladder.

The number of loans to home movers also declined in June to 66,300, from 71,100 in the same month last year.

The survey also revealed that the five interest rises since August 2006 are continuing to affect the market, with affordability measures edging upwards. The first-time buyer income multiple hit a new record at 3.37 times the average first-time buyer income - up slightly from 3.36 times in May, and 3.22 times in June last year. And, the proportion of income first-time buyers use to pay mortgage interest has also increased - from 19.1% in May to 19.3% in June. This is up from 16.5% in June last year.

The majority of first-time buyers able to get on to the property ladder are opting for fixed-rate mortgages. In June, 90% of first-time buyers took out a fixed-rate deal - up from 89% in May and 83% in June last year. This is the highest figure on record. And a record 76% of home movers also took out fixed-rate loan in June - up from 75% in May and 63% in the same month last year. The fact that buyers are showing a stronger preference for fixed-rate mortgages is encouraging as it will protect them against further interest rate rises during the period for which their loan is fixed and will give them confidence in their monthly mortgage payments.