Halifax, one of UK’s biggest mortgage lenders, has announced that the number of people who bought their first home in UK in 2014 has risen to its highest level in seven years. Almost 327,000 people bought their first house or flat last year, a 22% increase from 2013. This is the highest number of first-time buyers since the start of the financial crisis in 2007.
The main reason behind the surge in first-time buyers is the Government’s Help To Buy Scheme, which enables people to buy homes with a smaller deposit, as well as low interest rates, which makes it affordable for young buyers to repay their mortgages. In addition, the recent competition between banks and building societies, resulting in cheaper deals, has also fueled people to buy their first home.
Craig McKinlay, mortgages director at the Halifax has reiterated the importance of first-time buyers for a properly functioning housing market, and attributed the boost in first-time house sales to improving economic conditions and rising employment levels which has increased confidence.
Interestingly, house prices across UK went up, with the average first-time buyer paying £171,870 in 2014, approximately 10% higher than the previous year. Despite these soaring house prices, first-time buyers still found homes more affordable, since mortgage rates fell. The average deposit dropped by 7% in 2014, and first time buyers typically paid down payments of £29,218 – compared to £31,582 in 2013.
In addition, buyers were spending a smaller proportion of their income to pay back their mortgage, thanks to lower borrowing rates. First-time buyers spent an average of 32% of their disposable incomes to pay their mortgages in the third quarter of 2014, compared to 50% back in 2007.
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