The number of first time buyers reaches an all time high last year with more people opting for longer term mortgages of 30-years or more.

Research by the Halifax shows first time buyers in 2016 reached 335,750 the highest level since the 2007 financial crisis with 359,900.

In 2008 first time buyer numbers dropped to 192,300 with the number of homebuyers getting on the first rung of the ladder increasing 75% to the current level.

Competition from buy-to-let investors and reduced supply of suitable properties has seen many first time buyers continue to rent and save for a bigger deposit.

This is the third successive year the figures have been over 300,000 increasing 7.3%  from 312,500 in 2015 to 335,750 last year but the number of first time buyers remains 17% below the pre-crisis peak of 402,800 in 2006.

First time buyer deposits increase

The Halifax research shows the average deposit has doubled over the past decade from £15,168 in 2006 to £32,321 in 2016, an increase of 113% following higher property prices and stricter regulations on affordability.

The average deposit is now 16% of the cost of an average home compared to 10% a decade ago but lower than the 25% deposit required in 2009.

There is a significant variation in different regions and in London the average deposit for a first time buyer is up 276% from £26,701 a decade ago to £100,445 today.

Other regions are also higher with the South East increasing 173% to £47,472, the South West up 130% to £34,306 and the East rising 122% to £31,864.

Help for first time buyers can come from older family members as equity release buyers can access wealth with a lifetime mortgage to maintain your lifestyle or gift to a child or grandchild the deposit on their first home.

In contrast, first time buyers in Northern Ireland have seen the deposit required for a home purchase decrease from £20,834 in 2006 to £16,695 today.

Pressure has come from higher average house prices rising 52% since 2009 to a new record for first time buyers of £205,170 and for London the rise is even greater up 81% to an average of £402,692.

Rise in demand for 30-year mortgages

With higher borrowing needs first time buyers are opting for longer term mortgages of over 30 years or more to reduce the monthly cost.

Back in 2006, the Halifax said 64% of new homebuyers would take a mortgage of five years to 25 years and only 36% of mortgages were for more than 25 years.

In 2016 this has reversed and only 40% are terms of less than 25 years whereas 60% of all mortgages are for 25 years or more.

Today 28% of first time buyers select 30 to 35-year mortgage terms a share that has grown sharply from 11% in 2006. The proportion of 25 to 30-years terms is 28% and the 20 to 25-year terms have reduced to 28%.

Other types of homeowners such as remortgage buyers or home movers would have shorter mortgage terms as they tend to be older and lenders have 75 year old age limit.

Lower mortgage rates have helped homebuyers afford the larger mortgages which represent 33% of disposable income compared to the 50% figure of the 2007 peak.

Martin Ellis, Housing Economist at Halifax said first time buyers play a crucial role in the housing market as each transaction has an impact further up the chain, as well as helping to drive levels of housebuilding.

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.

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

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, for home improvements or holidays.

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