The number of first-time buyers getting onto the property ladder is on the up, helped by low mortgage rates which make owning a home more affordable.
Despite a subdued property market, the number of mortgages being taken out by first time buyers has continued to approach pre-financial crisis levels in recent months, according to Nationwide Building Society’s latest house price index.
“First time buyer numbers have been supported by the strength of labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum,” said Robert Gardner, chief economist at Nationwide.
“While house prices remain high relative to average earnings, low mortgage rates have helped to support mortgage affordability.”
First-time buyers have also been helped by weak house price growth, with annual growth up just 0.9% in April. The average price of a property in the UK now stands at £214,920.
The number of properties coming onto the market has slowed, the building society said, but there has still been a modest shift in the balance of the supply and demand of homes in favour of buyers in recent months.
Help to Buy support
The number of first-time buyers helped onto the property ladder by the government’s Help to Buy equity loan scheme increased by 14% last year compared to the previous year, latest figures from the Ministry of Housing Communities and Local Government show.
Whilst competitive mortgage rates have made it easier for many first-time buyers to be able to afford a home, saving up a deposit remains a major obstacle. Under the Help to Buy scheme, buyers only need to put down a 5% deposit and the government will lend a further 20% of the property price, or up to 40% if you’re buying in the capital. This loan is interest-free for five years, but after that homeowners pay an annual charge of 1.75% which increases every year by the inflation rate, plus another 1%.
Homeowners must repay the loan either when they pay off the mortgage, or when they sell their property. The scheme is only available for new build properties costing up to a maximum of £600,000. Find out more about Help to Buy in our guide to government schemes for first-time buyers.
Since the launch of Help to Buy in April 2013, 210,964 properties have been bought with an equity loan, with 171,053 of these (81%) bought by first-time buyers.
Last year alone, there were 52,057 purchases completed with the help of the equity loan scheme, of which 42,748 were first-time buyers, compared to 37,478 the previous year. More than half of first-time buyers (61%) put down a deposit of 5% or less of the property purchase price, whilst only 1 in 10 put down a deposit of more than 15%.
More mortgage options available
For those not buying new build properties, a wide range of lenders now offer mortgages for those with smaller deposits, with many offering loans of up to 95% of the property value.
Rates have remained competitive in recent months, as lenders continue to compete for business. Remember however, that the bigger the deposit you’re able to save, the wider the choice of mortgage options you’ll have available to you.
Seek expert help if you’re not sure which deals you might be eligible for, and use our first-time buyer mortgage calculators if you’re not sure how much you can borrow or how much it will cost.
First-time buyer numbers continue to rise