Thus, first-time buyers in the UK experience distinct barriers to homeownership in the housing market. The average loan amount has increased to a new all-time high of £210,800. The widely criticized stamp duty holiday has resulted in a rush of home buying activity. Larger homes are now more affordable for buyers, with no tax paid on the first £425,000 of a property’s value. The average age of first-time buyers is now 34 years old. Even more impressively, 31% of these first-time buyers are parents themselves as they begin their journey on to the property ladder.
As the housing market changes, first-time buyers have started getting bigger mortgages just to be able to break into the market. Over the past year, they have made up 20% of all spending in the UK housing market. Indeed this year, first-time buyers in London accounted for over 50% of all residential purchases. This intense love affair indicates a vibrant creative marketplace in the nation’s capital.
In practice, mortgage lenders don’t allow mortgages to go much above 4.5 times a borrower’s income. Recent market developments have increased the first-time buyer borrowing power. The truth is, they could now be getting access to an additional £20,000 to £40,000! Most lenders have lowered the interest rates they apply to their stress tests, adding an additional real easing of access to loans.
Despite rising borrowing amounts, house hunters are finding that they can purchase properties for about £2,000 less than a year ago. On top of this, homes are selling for an average of £6,700 less than the average just a month ago. This movement could be a sign of new normalcy in the market as buyers begin to adjust to new economic realities.
The UK’s average two year fixed mortgage rate currently stands at 4.91%. In comparison, the typical five-year fixed mortgage rate is slightly lower at 4.86%. These rates go a long way in making home ownership more attainable for many first-time buyers.
“Home ownership is more accessible now than at any point in the last three years, thanks to lower borrowing costs, lower real house prices, and more accessible mortgage debt,” – Luc Cook
Expert consensus can be hard to come by when it comes to the potential impact of such dramatic new developments. The Financial Conduct Authority has been calling out the dangers of current lending practices. They think these practices are for no good reason restricting access to affordable mortgages, which causes problems for overall home ownership.