First Time Buyers Still Struggling, Despite Healthy Mortgage Market

First time buyers are still struggling to get on the property ladder, despite an overall healthy mortgage market, according to recent data.

The latest First Time Buyer Tracker from Your Move and Reeds Rains found that sales to first timers have dropped by 1.7%, from 28,600 in September to 28,100 in October.

And recent figures from e.surv chartered surveyors confirm that although mortgage lending grew in November, first time buyers are still finding it difficult.

First Time Buyers Still Struggling, Despite Healthy Mortgage Market

Last month, overall house purchase approvals rose to 70,511, up 1.3% from 69,630 in October.

However, lending to small deposit borrowers – those with deposits of 15% or less of the property’s value – totalled just 11,493 in November, showing no improvement on October’s 11,489.

Small deposit buyers are declining as a percentage of overall homebuyers, accounting for just 16.3% of approvals, down from 16.5% in the previous month.

Director of e.surv, Richard Sexton, states: “The Chancellor’s proposals coincided with a climb in November’s mortgage market. More prospective homebuyers are finding their applications successful as we near winter.

“However, for first time buyers, it’s a different story. For those struggling to get their foot in the front door, promises of starter homes are of little consolation. Theoretically, first time buyers should be benefitting from measures such as the extended Help to Buy scheme and the Help to Buy ISA, which has finally come into force – but homeownership still remains a distant dream to many.”

He adds: “Mortgages may be available, inflation low and wages rising, but whether there are enough homes is another question. Supply must be addressed if aspirational homeowners are to see a real difference and only time will tell if words can translate into real benefits for first time buyers.”

In November, over 10,000 more mortgages were approved than a year ago, with 70,511 loans granted, rising by a fifth since the 59,262 recorded in November 2014. This is the highest annual increase reported since March 2014, as the mortgage market strengthens and confidence grows.

This jump in overall lending has given way for improvement in the small deposit mortgages sector. Home purchase lending to those with small deposits rose by 44% yearly, from 8,000 last November. However, the current total (11,493) is much smaller than that witnessed in the pre-recession heights of November 2007, when 16,227 were approved.

Sexton continues: “When compared to last year, mortgage lending is in a much healthier place. Twelve months ago, homebuyers were still suffering from the impact of MMR changes [the Mortgage Market Review], which has caused delays for lenders and deterred borrowers at the same time.

“However, we have emerged out of the other side into a much more stable lending climate as a result of these measures, with adventurous pre-recession mortgage approvals largely a thing of the past.

“Some small deposit borrowers are still struggling and with house prices predicted to keep on rising, there’s a real risk many may be permanently priced out of homeownership.”

He suggests: “In order to stop this, more needs to be done to remove obstacles facing homebuyers, particularly large deposit costs. For many, saving for hefty deposits can be financially crippling and so low deposit options are needed to give first timers a lift onto the property ladder. Of course, the most effective way to reduce deposit costs would be a slowing of house price growth, giving buyers’ savings a chance to catch up.”¹ 

¹ http://www.propertyreporter.co.uk/finance/healthy-mortgage-market-not-benefiting-ftbs.html