Number of towns affordable to FTBs is at its highest since 2003
The proportion of towns and cities across the UK that are affordable for first-time buyers has risen to its highest level since 2003, according to the latest Halifax First Time Buyer Review.
The average house price paid by a first time buyer in June 2011 was affordable for someone on average earnings in 48% of all local authority districts (LADs). This is the highest proportion of housing affordable for first time buyers in eight years, and compares with 40% in 2010 and just 6% in 2007.
North-South divide in the most affordable areas for FTBs
80% of all LADs in the North of the UK are affordable for first-time buyers: ten times the proportion of affordable areas in the South (8%). The North East is the only UK region where all LADs are affordable for FTBs. In contrast, London is the only region with no affordable areas for first time buyers on average earnings.
But the number of FTBs entering the market remains constrained...
Despite the improvement in affordability, the number of FTBs has decreased slightly over the past year in line with the market. Halifax estimates that there were around 86,000 first-time buyers in the first half of 2011: a fall of 10% from the same period in 2010 and close to half the number in the first six months of 2007 (181,500).
...driven by the need to put down an average deposit of over £27,000...
FTBs put down an average deposit of £27,719 in the first half of 2011, equivalent to 21% of the property price. There are signs that more products for buyers with smaller deposits are being made available. This is partly reflected in an 8% fall in the average deposit from £30,251 since the same period in 2010.
.. amidst significant pessimism over the likelihood of getting a mortgage
Halifax's recent Generation Rent report revealed that many potential FTBs have given up on the possibility of getting on the housing ladder. 77% of non-homeowners still aspire to own their own home, but half (46%) believe that Britain is becoming a nation of renters because of the obstacles facing first time buyers. 55% believe first time buyers are too scared of being turned down to apply, despite the fact that Halifax accepts 8 out of 10 mortgage applications from first time buyers.
Suren Thiru, housing economist at Halifax, commented: "It is encouraging that housing affordability for first time buyers in general has improved significantly over recent years, as a consequence of the marked falls in both house prices and interest rates since 2007. However, there is a distinct North-South divide within this improvement as the majority of affordable areas are in the North."
Halifax continues to respond to constrained FTB market...
Halifax announced in June that it would launch its First Time Buyer Pledge with the aim of educating customers on what they should expect from the mortgage application process and dispelling some of the fears and misconceptions that has led many to give up on their dream of owning a home altogether.
Stephen Noakes, Commercial Director, Halifax Mortgages, commented: "The significant challenges in raising a deposit and widespread pessimism about the chances of being accepted for a mortgage are clearly preventing some potential first time buyers from even attempting to get on the ladder. However, at Halifax we accept 8 out of 10 first time buyer applications and, as these latest figures show, there are opportunities for those who do want to but their first home. The key is to provide more information, more education, and more help for non-homeowners in order for them to make the most of those opportunities: it is with this intention that we have launched the Halifax First Time Buyer Pledge".