First time buyers face a number of contradictory indicators, writes Phil Whitehouse, head of The Mortgage Alliance (TMA)
To buy or not to buy? That may be the question but it seems that UK consumers remain unsure of the answer. Just 45% of consumers surveyed in the Building Societies Association’s (BSA) June 2010 Property Tracker survey think that now is a good time to buy property. This compares with a figure of 49% of those surveyed and asked the same question in March 2010.
Recently released April figures from the Council of Mortgage Lenders show that first-time buyers made up the lowest proportion of house purchase loans since September 2007. They accounted for 35% of all house purchase mortgages, down from 39% in March and 38% in April 2009. Overall, there were 40,000 loans advanced for house purchase in April worth £5.7 billion, down from 45,000 – worth £6.3 billion in March but up from 35,000 – worth £4.5 billion in April 2009.
Yet new research from Santander Mortgages suggests that the vast majority of potential first-time buyers would be better off buying a property than continuing to rent. In every part of the country other than London, average monthly rental prices now exceed those for the average mortgage repayment.
According to the bank’s research, would-be buyers currently renting outside of London could save themselves an average of £1,040 a year if they were able to own their own property. The average monthly rent in the UK (excluding London) is currently just over £420 compared to monthly repayments of £334 for the average first-time buyer – equating to an average saving for homeowners of £86 a month.
Only those in the capital will be better off if they continue renting. Despite rental prices in London being roughly 56% higher than the average across the UK, at £701 a month, exceptionally high house prices mean it would, on average, cost potential first-time buyers an additional £359 a month to buy.
The research into typical first time buyer flats and terraced properties found the average price across the country to be £115,657. This means that a first-time buyer, applying for a 75% loan-to-value mortgage (the average LTV for first-time buyers according to the Council of Mortgage Lenders) would require a deposit of £28,914.
So are first-time buyers missing a trick? Are they right to still be slightly wary of the housing market? Or is it simply a case that people are unable to raise a sufficient deposit?
In all reality there appears to be no right or wrong answer and it’s inevitable that people will look at the market through different eyes as they encounter different circumstances. As stated by Paul Broadhead, head of mortgage policy at the BSA, “This rise in negative sentiment about whether now is a good time to buy property in the UK market could reflect wider concern about the state of the economy and the warnings the new coalition government has issued about the austerity measures that will have to be taken.””