The number of first-time buyers increased by more than a fifth in 2014, reaching the highest level in seven years, according to data from the mortgage lender Halifax, illustrating the impact of the state-funded Help to Buy scheme on the UK property market.
The underlying data show, however, that the rate of growth halved between the first and last quarters of the year, echoing the trend shown in Bank of England mortgage approvals data which hit a 17-month low in November, and providing further signs that the housing market in 2015 may be more subdued.
Based on an extrapolation of its own mortgage data, Halifax estimated a 22 per cent jump in the number of first-time buyers — the third successive annual increase — with 326,500 households getting on the property ladder.
In the first quarter of 2014, sales to first-time buyers were 34 per cent higher than the previous year, but the rate of growth tailed off, falling by more than a half to 16 per cent by the final quarter of 2014.
“The rate of decline ties in with the overall story of a slowdown in the housing market,” said Howard Archer, chief economist at IHS Global Insight, who added that tighter checks on borrowers ushered in by April’s mortgage market review would have contributed to this.
“The fact that activity hasn’t picked up since then suggests there’s more to it than that,” he said. “I don’t think there’s going to be a surge in activity in 2015, but the stamp duty reforms, pick up in earnings growth and feeling that the Bank of England won’t increase interest rates until the end of the year should cause activity to pick up from current levels.”
The Halifax data for 2014 represent a 70 per cent increase in numbers of first-time buyers from 2008, when credit availability dried up in the financial crisis. First-time buyers were behind nearly half of all transactions made with a mortgage last year, the lender said, compared with just over a third in 2007.
Halifax cited the Help to Buy scheme, which has loaned buyers deposits and guaranteed loans, as a positive factor along with a wider improvement in mortgage affordability in recent years.
It calculated that the average size of a first-time buyer deposit had fallen 7 per cent in the past year as a result, now standing at just over £29,000.
However, the average purchase price paid by first-time buyers rose 9 per cent in 2014 to £171,870, just 2 per cent below the average at the market’s peak in 2007.
A comparative analysis of ONS data suggested that mortgage repayments of first-time buyers were now about one-third of disposable income, compared with 50 per cent in 2007.
“Improving economic conditions and rising employment levels have boosted confidence among those thinking about getting on to the housing ladder for the first time, contributing to the significant increase in the number of first-time buyers in the past two years,” said Craig McKinlay, mortgages director at Halifax.
“Record low mortgage rates and government schemes such as Help to Buy have improved affordability, enabling more first-time buyers to buy their own property.”
London was the least affordable market for first-time buyers, with an average price of £323,333. The data show, however, that more than a quarter of local authority districts across the UK are now out of reach for many first-time homebuyers, based on a ratio of average earnings and average house prices. This compares with just 5 per cent of districts being unaffordable in 2007.
Northern Ireland was the most affordable region for first-time buyers, with an average house price of £80,703. Seven out of the top 10 most affordable areas were in Scotland, including East Ayrshire and Inverclyde.
Nationally, the average age of a first-time buyer was 30, the Halifax said, rising to 32 in London.
Get alerts on UK house prices when a new story is published