Making sense of first time buyer statistics

If you’re a homeowner, you’ll more than likely be aware of a downturn in house prices over recent weeks. Some newspapers and websites will tell you that house prices are falling, mortgages approvals are dropping and there’s a shortage of first time buyers on the market. The third factor particularly seems to be a worrying one when put in conjunction of other slowing factors in the market. It suggests that now first time buyers are completely being priced out of the market, meaning there are fewer people to start housing chains or create demand for new property.

According to the Halifax, the average British house price stands at £192,000, while other lenders quote even higher figures. Meanwhile, the average wage (GDP) stands at £22,500, which is nearly eight times lower than the average house price. This figure alone makes you wonder how first time buyers could possibly get onto the market, considering that banks are only prepared to lend around five times the value of a home. With these figures in mind Halifax has said that the number of first time buyers has been at its lowest since 1980, with just 300,000 people managing to get onto the housing ladder.

The figures are backed up by the Council of Mortgage Lenders, who provides some of the most comprehensive statistics on mortgages. They also state that the number of loans provided to first time buyers dropped in 2007 from 2006, but it was actually at similar levels in both 2003 and 2004, albeit slightly higher. While this could be attributed to the credit crunch and a greater level of caution shown by banks in lending to first time buyers, interest payments as a percentage of income have risen to a record 19.4 per cent, suggesting that buyers are being priced out.

Additionally the average income for first time buyers making it onto the property ladder stands at £35,000 – far higher than the national average salary. However, what is not clear is whether or not this figure is a combined one of couples or friends heading into a mortgage. You would think that with this dramatic increase in income (the average income for first time buyers has more than doubled in ten years) that first time buyers would also have to be much older in 2007, but this wasn’t true. The average age of buyers has remained at 29 for three years, and has not been at a lower level since 1996.

Even if the level of first time buyers had fallen by some 15 per cent on the previous year the value of the mortgage market hasn’t actually decreased, this is because the value of the average mortgage for first time buyers has shot up. There has almost been a 100 per cent rise in the average mortgage sum in five years, and it now stands at some £116,820. The Fish4 website has a good list of property listings as well as advice, which should help you with your research, as can the Remortgage Market website.