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Record rise in first-time buyers despite lower affordability

Young family viewing a house for sale

There was a big increase in the number of people buying their first home last year, despite rising house prices and falling affordability.

New figures from mortgage lender Halifax show that 409,370 buyers managed to get on the housing ladder in 2021, up a record 35% on 2020.

The average buyer last year was 32 years old and put down a £53,935 deposit on a first property costing £264,140. The average age at which someone buys their first home has risen from 29 in 2011 and is now over 30 in every region of the UK.

Since 2009, the number of first-time buyers has more than doubled -- with an increase of over 100,000 in the last 12 months alone.

Among the factors driving the market last year was a stamp duty holiday that started in 2020. Although this did not directly affect most first home purchases, it resulted in more so-called "first-rung" homes coming on to the market, which first-time buyers took advantage of in 2021 despite the rise in property prices.

"While working from home and the 'race for space' was key for many, particularly movers, it's clear that the stamp duty holiday increased the availability of first-rung homes as others moved up the ladder," said Esther Dijkstra, mortgage director at Halifax.

"Lifestyles have changed; over time more people have chosen to go on to higher education, go travelling, or move around for work, which are all factors in the increase in first-time buyer age. However, undoubtedly, the biggest drivers are the cost of homes and the need to save a significant deposit to get on the housing ladder."

Last year also saw a widening gap between purchase price and deposit for first-time buyers, Halifax found.

Across the UK the average first-time buyer deposit fell by 6%. Set against the rise in the average purchase price of first homes, it meant that the gap between purchase price and deposit widened in every region.

A deeper dive into the figures shows how the growth of house prices has outstripped that of incomes, with the average price to earnings ratio for UK first-time buyers now standing at 6.9x.

Affordability has fallen in all but three local authorities in the past decade. In fact, the price of an average first-time buyer home is now less than four times the average income -- considered the limit for affordability -- in just 15 local authorities around the UK. The least affordable area for first-time buyers is the London borough of Brent, where homes are 12.3x average earnings, while the most affordable is Clackmannanshire in Scotland, where it is just three times.

According to the Halifax report, the five most affordable local authorities are all in Scotland, and -- perhaps not surprisingly -- the five least affordable are all in London.

Posted by Fidelius on February 28th 2022

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