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First-time buyer affordability at 12-year high

Mortgage affordability for those looking to take their first steps onto the property ladder is at its most favourable for 12 years, according to the latest annual Halifax First-Time Buyer Review.

The proportion of disposable earnings devoted to mortgage payments by a potential new first-time buyer stood at 27% in September 2010; the lowest since December 1998 and almost half of the peak level of 50% in September 2007.

This significant improvement in affordability over the past three years has been mainly driven by a combination of lower house prices and declining mortgage rates.

In 2010, 40% of local authority districts across the UK were ‘affordable1’ for the average first time purchaser, a considerable improvement from 2007, when only 6% of areas were affordable, although this is less than half the proportion of the affordable LADs in 2000 – 82%.

The North East is the most affordable region in the UK for first time buyers, 83% of local authority districts here are affordable to first-time buyers, more than in any other region.

Only 5% of first time buyers paid stamp duty between April and November 2010 as a result of the temporary increase in the Stamp Duty threshold for first-time buyers from £125,000 to £250,000 announced in March.

Nationally, 39% of home purchases made by first-time buyers have benefitted from the increased allowance. First-time buyers in the South East have benefited most from the change, almost three quarters – 73% of first-time buyers in the region not paying stamp duty due to the increase.

Martin Ellis, housing economist at Halifax, says: “The noughties were a difficult period for many looking to get onto the property ladder. The substantial rise in house prices over much of the decade prevented many potential first time buyers from entering the market, however, affordability has improved significantly over the past three years.

“Whilst the tightening in lending criteria experienced across the mortgage industry since the onset of the credit crunch in 2007 deterred first-buyers from trying to secure mortgage finance,there are now encouraging signs of a modest improvement in mortgage availability.”

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  • Mark 31st December 2010 at 9:16 am

    I don’t suppose it could have anything to do with house prices being way too high for way too long! They are still expensive in terms of average FTB salary to price, and rates are not going to stay at these levels for ever. Anyone going into it now ought to assume some kind of historical average rate and use the gap between that and what they will be paying to reduce the capaital sum whenever possible.

  • Paul 29th December 2010 at 2:42 pm

    Yes, just goes to show how pertinent the FSA affordability calculations are going to be.

  • A Has Been 29th December 2010 at 11:13 am

    Affordable only because interest rates are artificially low. Follow the lead of the Halifax…buy a house, when rates go up, get thrown out because unlike the Halifax you won’t get a lifeline!!