A BOOM in the number of first time buyers was revealed yesterday, with the number of purchases by new owners soaring by 78.6 per cent in April compared to a year ago.
The astonishing figure, recorded by LSL Property Services, meant nearly 10,000 more houses were snapped up by people who have never owned homes before. The number of new homes bought in April was even 15 per cent up from March, with 22,000 new owners managing to get a foot on the housing ladder in just a month.
Property specialist LSL credited some of the rise to the effect of the funding for lending scheme, which incentivises banks to lend mortgages to people who need larger amounts of money.
The average loan to first time buyers rose from 79.9 per cent a year ago to 80.4 per cent in April of the property’s value, indicating that lenders are now less worried about the size of their loans.
The average age of people buying for the first time in April was 30, and an increasing number have been forced to turn to family for assistance.
Only a narrow majority of 51 per cent managed to finance their purchase themselves, while the rest needed help from either a family member or a government scheme. April 2012 was a particularly poor month for sales, with a special stamp duty holiday for first time buyers ending in March. But this April’s performance is also 54 per cent higher than April 2011, for which there were no similar distortions.
David Newnes, LSL Property Services director, commented: “Increased lender confidence has lead to lower rates and a wider range of first-time buyer mortgages. The result: a super-strength opening to 2013 that has seen 15 per cent more first-time buyers than last year”.
But Newnes warned that policies such as funding for lending, which ends in 2015, and help to buy – the government funded scheme due to start next year which will provide lenders with a guarantee of up to 20 per cent of a mortgage – could inflate property prices, and become counter-productive.
The governor of the Bank of England, Sir Mervyn King, recently warned against making policies designed to artificially boost the housing market a permanent feature of the British economy.
Without assistance, it is now increasingly difficult for aspiring owners to break into the market. The price of the average house for first time buyers jumped by almost £15,000 in the same 12 month period, rising 12.1 per cent to a high of £138,632 in April. Most first time buyers expect prices to rise or remain steady over the next year. Despite falling real incomes, only eight per cent think prices will drop in 2013.
The desire to own a home still remains powerful among UK renters. LSL says 96 per cent aspire to own a home eventually, but only 42 per cent believed they would be able to buy a home in the next four years. A full 15 per cent believe that despite their intentions, they will never be able to afford their own property.
On Tuesday, Markit released its purchasing managers’ index for the construction sector, indicating house building had increased by its fastest pace for over two years in April, after help to buy was announced in the March budget. However, building remains relatively weak, having suffered a significant contraction through the previous year.