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First time buyer numbers remain strong as more select 35-year mortgages

There were 310,000 first time buyers in 2015 according to the Halifax with an increase in the number taking 35 year mortgages.

A Halifax report shows the number of first time buyers has reduced marginally by 0.5% from 311,700 in 2014 to 310,000 last year.

This is in line with general residential house purchases and due to a lack of housing supply although first time buyers numbers have increased by two-thirds since 2011 when there were 193,700 buyers.

The average price paid by first time buyers has increased from £172,563 in 2014 to £190,180 last year.

The average deposit paid has also increased to £32,927 which is 13% more than the year before and 88% higher than the £17,499 deposit in 2007.

More 35-year mortgages selected

Many first time buyers are spreading the costs of their mortgage payments when they buy their homes with longer terms. In 2007 the number of first time buyers taking out 35-year mortgages was 16%.

By 2015 this had increased to 26% while at the same time the proportion with 20-year or 25-year mortgages had reduced from 48% to only 30%.

There has also been a shift from tracker mortgages to fixed rate mortgages as home buyers expect an increase in interest rates.

For remortgage buyers at the end of your mortgage deal, you can avoid the lenders expensive variable rate and switch to a preferential rate to reduce your monthly repayment costs.

The combination of record low mortgage interest rates and earnings growth has resulted in the proportion of disposable earnings to mortgage payments reducing to 32%. This compares to the peak in summer of 2007 when the proportion was as high as 50%.

With lower interest rates home movers have the opportunity to make overpayments, reducing the loan to the lender and total cost of the mortgage.

Craig McKinlay, Mortgages Director at Halifax has said that affordability for first time buyers has improved since 2007.

House prices as a multiple of earnings for areas outside of London and the South East of England are more affordable and below the long-term average of 4.0. The lowest is Copland in the North West and Inverclyde in Scotland with 2.8 times earnings.

The highest is Hammersmith and Fulham in London where house prices are 11.9 times earnings followed by the Boroughs of Brent, Hackney, Haringey and Islington.

Deposits remain high

The higher house prices during the year has resulted in larger average deposits for first time buyers. This has increased from £29,094 in 2014 to £32,927 this year.

In greater London the deposit was higher than any other area at £91,409 representing 25% of the property value. On average first time buyers paid £367,990 for their new homes.

In the South East the average rise in the deposit was 24% from £35,582 to £44,024. The deposit for London was 4.5 times higher than Northern Ireland with the lowest average of £16,578 representing 155 of the property value.

Help for first time buyers can come from family members as the equity release buyer access cash using a lifetime mortgage and give a child or grandchild the deposit.

First time buyers have also benefited from Stamp Duty changes in December 2014 based on the average price paid for a new home. The largest savings were made for people buying in London.

The average house price in London is £367,990 and first time buyers are now paying £8,399 compared to £11,039, a saving of £2,640.

In the North, Wales and Northern Ireland the saving are also significant as the average house price is below the £125,000 threshold and do not pay stamp duty.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage, home improvements or even buy a more expensive home.

Learn more by using the property value tracker chart, mortgage monthly cost calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.

Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%
1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%

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    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.


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