Affordability for First-Time Home Buyers Improves

A report undertaken and released by Halifax has revealed home affordability for potential first-time buyers has improved significantly in the past two years. The Halifax Fist-Time Buyer Annual Review demonstrates that the average price a first-time buyer paid for a home was affordable to those who earned an average salary in 39% of local authority districts.

The report examines the level of affordability for first-time home buyers in some 279 local authorities, which also includes 30 boroughs within the London area. Furthermore the report highlights that housing is affordable for first-time buyers in almost four in ten of these areas, in comparison to the fact that in 2007 only 6% of these local authority districts were affordable. Whilst between 2008 and 2009 some 24% of these local authority districts were affordable for first-time buyers.

The study further details that during the period of 2007 to 2009 the North East, Yorkshire and the Humber were the areas that experienced the greatest increase in the number of local authority districts becoming affordable for first-time home buyers. In fact the North East saw a dramatic increase from just 6% to 94%, whilst Yorkshire and the Humber saw a similar increase of 6% to 81%. However, conversely Northern Ireland and London were the only two areas which failed to see any increase in the number of affordable local authorities. These two areas represent the only areas within the UK where the typical home bought by a first-time buyer is still unaffordable to someone who earns an average salary in all of the local authority districts reviewed.

Previously the percentage of disposable income attributed to mortgage payments by a prospective new first-time buyer, who earned the average national salary, peaked at 50% in July 2007. However, this statistic almost halved to 27% in November, 2009, which is thought to be attributable to not only lower house prices but also to the fall experienced by interest rates. What’s more this figure of 27% is in fact lower than the average of the last 25 years, which currently stands at 34%.

Despite the fact that the figures and statistics show a notable progression the report emphasises that several perspective first-time buyers have been prevented from entering the property market due to the rigid lending criteria which has been in place since the summer of 2007. Recent indications appear to signal that the lending criteria may have ceased tightening. This is thought to be true as industry-wide figures show that the percentage of the overall cost of a house that first-time buyers pay as an average deposit has remained the same since 2009, after a marked increase in 2008. This combined with the fact that the number of live mortgage products has grown by 33% would appear to support this thesis.

However, in a year that has seen record numbers of home repossessions, insolvencies and redundancies, first-time home buyers are still advised to proceed carefully when deciding to take out a mortgage.

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