The number of first-time buyers in the UK grew by about one fifth in 2013, marking the strongest annual increase in more than a decade…
Property market shows sharp rise in first-time buyers
Strongest annual increase in more than a decade takes overall numbers back towards 2007 levels
The number of first-time buyers in the UK grew by about one fifth in 2013, marking the strongest annual increase in more than a decade.
There were about 265,000 first-time buyers in 2013, the highest annual total since 2007 and rising 22% from an estimated 218,000 in 2012, according to Halifax, which used a combination of Council of Mortgage Lenders’ figures and its own to make its findings.
Halifax said the 22% increase is the strongest annual rise since 2001. It also meant that first-time buyers increased their share of all house purchases made with a mortgage, now accounting for 44%, up from 40% in 2012.
Its figures showed that ultra-low interest rates have helped to improve mortgage affordability in recent years. The proportion of disposable earnings devoted to mortgage payments by a first-time buyer stood at 30% in the last three months of 2013, compared with a peak of 50% in the summer of 2007.
A string of government schemes have been launched with the intention of helping those aspiring to get on the property ladder. In October, the government launched a new phase of its flagship Help to Buy scheme, which offers state-backed mortgages to people with deposits of just 5%.
Critics of the scheme have argued that a lack of supply of homes for sale amid rising demand from buyers has put upward pressure on house prices, meaning buyers have to stretch their borrowing further to keep up with the price increases.
Fears have also been raised about what will happen to borrowers when interest rates start to rise again and their mortgage payments go up.
The housing minister, Kris Hopkins, said: “I’m pleased to see that our efforts to help aspiring homeowners and restore the health of the housing market are reaping results, with the biggest increase in first-time buyers for a decade.
“Already, our Help to Buy schemes have helped over 26,000 people without a large deposit to get on the housing ladder, while our work to cut the record deficit we inherited has helped keep interest rates low and home ownership at its most affordable for six years.
“And in response to this increased demand, developers have already said they are planning to build more homes, with housebuilding at its highest level since 2007.”
But the figures, coming on the heels of news of an 8.4% surge in house prices across the UK, sparked a fresh warning from a Liberal Democrat cabinet minister that government policies risked creating a new housing bubble.
The business secretary, Vince Cable, said he feared unsustainable rises could jeopardise the wider economic recovery.
Cable told the Daily Telegraph: “The government has done really good work turning the economy around: we can’t now risk it being derailed by a housing bubble repeating the mistakes of Gordon Brown.
“If we are going to get a recovery it has to come through exports and British industry, not property inflation,” he said.
Halifax also found that less than one third (32%) of local authority districts in the UK have house prices which are affordable to a first-time buyer on average earnings. House prices are deemed to be affordable if they cost up to four times earnings.
But this is a significant improvement compared with the peak of the market in 2007, when just 5% of districts were found to be affordable.
All local authority districts in London, the south-east, the south-west and the east of England were found to be unaffordable for first-time buyers in 2013.
In Scotland, 46% of local authority districts were found to be affordable and in Wales, 75% of districts were affordable. Halifax did not include figures for Northern Ireland in its affordability findings.
Yorkshire and the Humber had the biggest percentage of local authority districts which were affordable to first-time buyers, at 76%.
Halifax found that close to half (45%) of first-time buyer purchases in 2013 were below the