The number of first-time buyers soared to a nine-year high in 2016. This was despite the value of starter homes breaking through the £200,000 barrier for the first time. According to Halifax, 2016 saw the highest number of first time buyers since the financial crisis in 2007.
The high street bank estimates that there were 335,750 first-time buyers in 2016, which is the highest figure they have seen since 2007, which saw 359,900 people take their first steps onto the property ladder.
Halifax has also reported that the amount of money first-time buyers require to put down on a deposit has more than doubled since 2007 and now stands at £32,000.
So why now after nine years?
A major factor in the sudden rise in first-time buyers is the record low mortgage rates.
Despite rising house prices, the typical first-time buyer spent 32% of their pay cheque on mortgage payments, which remains in line with the long run average of the last nine years and well below the peak of 50% reached in the summer of 2007.
The increase can also be attributed to government schemes such as Help to Buy, which have helped to not only assist prospective buyers in saving for a deposit, but have also reinvigorated the mortgage market for buyers with a small deposit.
Who does it affect?
Of course it is great news for those looking to buy their first homes, but it’s also good for the housing market as a whole.
First-time buyers stimulate the housing market, as they buy the properties from those looking to trade up the ladder.
The role of the new buyer is becoming increasingly more important in the housing market. In 2016 first-time buyers accounted for 49% of all purchases made with a mortgage, the highest level since 1996.
2016 was the third consecutive year in which first-time buyer numbers have totalled more than 300,000. They have been steadily increasing since the record low of 192,300 in 2008.
The average property price paid by a first-time buyer in 2016 broke through the £200,000 barrier for the first time in 2016 to stand at a record £205,170, a significantly higher number than the £135,254 paid in 2009.
Unsurprisingly, first time buyers in London faced the highest prices at £402,692 for their first home. They also faced saving for a far higher deposit at £100,445.
In order to afford the higher costs, many first-time buyers have been opting for longer mortgage terms. The national average in 2006 saw most first time buyers choosing terms of 25 years or under. Now, however, most first time buyers face a mortgage term of 30-35 years.