Steep house prices remain the biggest challenge for first-time buyers, who often need to save tens of thousands of pounds to bridge the gap between the purchase price and borrowing.
Despite predictions that property prices would fall following Britain’s vote to leave the EU last June, they have so far proved resilient, with Nationwide Building Society’s house price index showing that UK prices rose by 4.5 per cent in 2016. Halifax said prices were 6.5 per cent higher by the end of the year.
Annual house price growth is, however, expected to slow over the course of 2017. Although not expected to reverse, it should help first-time buyers with affordability and make it a little easier for them to build the deposits required to buy.
The average first-time buyer deposit across the UK has more than doubled from £15,168 in 2006 to £32,321 today, according to Halifax. This is no mean feat for anyone to save, let alone those in their 20s and 30s who are often on low incomes and struggling to clear student debts.
The Help to Buy ISA, launched in December 2015, and the Lifetime ISA both aim to help first-time buyers build deposits, boosting their savings with the help of government bonuses. These should help aspiring buyers get in the savings habit and are an important front-end addition to schemes assisting those ready to buy.
Without these schemes, there is the danger that first-time buyers give up on their dreams of owning a home altogether given the rate of housing price inflation.
Despite the challenges facing those trying to get on the property ladder, first-time buyer lending is holding up. First-time buyers borrowed £4.7bn in November, latest figures from the Council of Mortgage Lenders show, up 4 per cent on the previous month and 9 per cent on November last year.
There are perhaps signs that first-time buyers are benefiting to an extent from a reduced level of competition for property from buy-to-let landlords. Becoming a landlord is no longer as appealing as it used to be, thanks in part to the introduction of the 3 per cent Stamp Duty surcharge on additional homes introduced on 1 April last year.
Landlords have also been hit by the introduction of new stricter lending criteria from the start of this year as well as tax relief changes, which are due to be phased in from this month and will limit the amount of tax relief on mortgage interest.
Although the buy-to-let market has so far been pretty resilient there are bound to be some landlords who will either be put off from further acquisition or at least waiting for the dust to settle. Recent Council of Mortgage Lenders data pointed to a decrease in lending of 9 per cent year-on-year and most recent activity has been remortgages.
Of course these buy-to-let changes are likely to put upward pressure on rents in future, which would ironically have a knock-on impact on those already struggling to build sufficient deposits.