Though discussions regarding the UK property market seem to revolve around high prices and housing shortages, statistics on first-time home buyers suggest it's not all bad news. In fact, Tess Little reports that the number of first-time home buyers in the UK is at its highest level since the start of the financial crisis. This suggests that government policies geared towards providing more affordable first-time buyer mortgages are achieving their goal, and boosting the property market in the process.
Here are a few more positive statistics:
First-time home buyers represent 44.3% of all mortgages written. The number of first-time home buyers is up 68% from June last year, the highest rise in ten years. According to Halifax, 46% of all home buyers between January and June were first time buyers - the highest proportion since 2000. In the first half of 2014, first time home buyers spent 31% of their disposable earnings on mortgage payments; a 47% drop from what they spent in the first half of 2007.
The mixed reception to the government's Help to Buy scheme notwithstanding (some claimed that it would hinder more than help the property market by pushing up prices), it's clear that the policy has played its part in promoting support for first-time buyer mortgages. The Help to Buy scheme was introduced by Finance Minister George Osborne a year ago, when he pledged that the UK government would make a substantial contribution to the deposit on any property that met the necessary criteria. This has made banks more willing to offer loans to first-time home buyers, and tripled the number of loan products available to borrowers with a 5% deposit.
Mortgage lenders offer longer terms
It's not only government policies that are playing a role. Private mortgage lenders are also doing their part to promote the first-time home buyer market, by offering longer-term mortgage deals (some ranging from 35 to 40 years). Halifax and Nationwide are among those that have attracted a large number of first-time buyers with such deals. Even though these long-term mortgages require buyers to pay double the value of their home in monthly payments, it's a compromise they are willing to make. In fact, many young home buyers take these mortgages with the expectation that their salaries will improve over time, making it possible for them to pay off the mortgage quicker.
While some question the wisdom of such an arrangement, others see it as an opportunity for young home buyers not yet established in a career to get their first foot on the property ladder.
It's encouraging to know that there are initiatives to make it easier for first-time home buyers to get mortgages, and the sharp rise in first-time home buyer numbers prove that such measures have been effective. Nonetheless, you should assess all your options and get professional advice before making any long-term decisions (40 years is very long term).
Disclaimer: The information provided is for general information purposes. It does not constitute investment advice nor can it take account of your own particular circumstances. If you require any advice on investments, you should contact a financial or other professional adviser.