First Time House Buyers are Paying More

Hand shake agreeing a house sale

The May lending figures are in and they give us our first glimpse into the effects of the Mortgage Market Review. The figures suggest that the impact is subtle and despite predications that the stricter regulations would prevent first time house buyers from climbing on the housing ladder, first time buyers are still making up a large portion of the market.

The Mortgage Market Review (MMR) that was introduced at the end of April mandates that lenders conduct more thorough financial checks to guarantee they would be able to repay their loans if interest rates rise 3% and ensure that 85% of mortgages are limited to people who are borrowing less than 4.5 times their income.

However, the average price of properties bought by first time buyers has increased by more than 11%, which makes the average cost of these properties more than £202,200.  Despite the fact that the average gross income remains at £37,000 and first time house buyers are borrowing loans on average 3.43 times their gross income, first time house buyers continue to make strides in the housing market.

As the housing prices continue to rise it has hypothetically become harder than ever to take the first step but lenders have taken the necessary steps to quickly give first time buyers the boost that they need by offering loan-to-value products, family-assisted schemes and offset products in addition to Help to Buy and other government schemes.

First Time Property Buyers Forced to stay at Home

Home Pretty Text with Grass and flowers

First-time buyers took out more than 26,000 mortgages worth £3.9 billion in May, making the first full month that MMR was in place also the month with the biggest number of loans from first time buyers since November 2007 according to Council of Mortgage Lenders.

Although first time property buyers are continuing to climb the ladder, the housing prices are climbing faster. With over £200,000 needed to secure a property, young people are growing more concerned with house prices rising too quickly and homes are becoming less affordable for first time property buyers.  As Prices continue to rise they are making the stability of being a home owner more unrealistic for young people who will be forced to stay at home longer or rent.

An Increase in International Buyers

Prime locations in cities such as London have suffering from a lack of supply but increasing demand from domestic and international buyers. According to experts there needs to be roughly 50,000 new homes built every year in the capital but the current construction is less than half of that.

Regardless of housing prices jumping by more than 11% for first time house buyers, they have managed with help from government schemes and lenders to purchase 48% of the properties in Manchester alone. Nevertheless, if housing prices continue to rise, becoming a property owner will become increasingly unrealistic for first time buyers.