May saw first-time buyers pay an average of £173,282 to get onto the housing ladder, up 2.7 per cent from £168,656 in April and 15.8 per cent more than the average of £149,645 seen in May 2015.
Across the market as a whole, house prices dipped in May in anticipation of the referendum, with the latest Your Move house price index showing house prices in England and Wales slumped 0.4 per cent month-on-month in May. But the bottom of the market defied this trend, fuelled by unwavering first-time buyer demand, argued the estate agents.
Completed first-time buyer sales totalled 24,900 in May, just 0.8 per cent lower than the 25,100 seen in April, even as first-time buyers were held back by a lack of homes on the market ahead of the vote. The overarching trend stayed strong, with first-time buyer numbers 13.2 per cent higher than the 22,000 seen in February and 5.1 per cent up on a year ago.
Your Move and Reeds Rains director Adrian Gill explained many first-time buyers still want to capitalise on the record low mortgage rates available at the moment, which mean that monthly mortgage repayments are increasingly affordable.
“The Brexit result won’t change the fact that huge numbers of aspiring first-timers want to buy a first home, and lots won’t want to wait out the two years until the renegotiations over the EU have been completed.
“In the short-term, the wider market wobbles may benefit first-timers, giving them the leverage to negotiate harder and get a good deal on purchase price. Canny first-timers will use any Brexit lull as a chance to snap up a good deal and get on the housing ladder.”
| Monthly Transactions | Average Purchase Price | Average LTV |
May 2016 | 24,900 | £173,282 | 84.0% |
April 2016 | 25,100 | £168,656 | 83.8% |
1 month change | -0.8% | +2.7% | +0.2 (from 83.8%) |
3 month change | +13.2% | +2.8% | +1.5 (from 82.5%) |
1 year change | +5.1% | +15.8% | +0.4 (from 83.6%) |
The average mortgage rate for first-time buyers slipped further in May to 3.08 per cent – a new record low – following a fall of 0.37 percentage points over the past year.
Despite the climbing overall cost of a home, these cheaper rates mean mortgage repayments have not increased significantly as a proportion of first time buyer’s income. Last month, mortgage repayments accounted for 21.1 per cent of income, just 1.7 percentage points more than a year ago.
Meanwhile, the average first-time buyer deposit currently sits at £27,669, up 12.8 per cent from £24,523 a year ago. As a proportion of income, the average deposit has climbed 6.1 percentage points compared to May last year.
Meanwhile, research from LMS revealed monthly gross remortgage lending reached to £5bn in May, up by more than a quarter year-on-year, although it was down by 16 per cent from April. The number of remortgage loans also decreased month-on-month, by 7 per cent from 34,800 in April to 32,334 in May.
The average amount of equity withdrawn per customer from remortgaging activity rose by 43 per cent, from £23,479 in April to £33,691 in May. The average amount of equity withdrawn was also up by a quarter in comparison to May last year, when equity withdrawn stood at £26,863.
LMS chief executive Andy Knee said the EU referendum vote is likely to put a dampener on the housing market at least until the autumn.
“However, interest rates remain at historically low levels and for those with a mortgage now is a great time to take out a fixed rate and stabilise their financial outgoings. Lenders may well come under pressure and their appetites for new business may shrink in the short term. If they do, the range of excellent rates available today might not be around for much longer, so fixing now might be a smart move.”
