Proper news from Britain - News from Britain you won’t find anywhere else. Not the tosh the big media force-feed you every day!
- Ability to borrow bigger mortgages is heating up the market for starter homes
First-time buyers are battling soaring house prices as brutal competition for homes heats up, new research reveals.
House prices for those buying their first property have outpaced the rest of the market because it is now easier to get a larger mortgage, according to Zoopla.
This is due in part to moves by lenders, backed by Chancellor Rachel Reeves, to loosen their rules and allow first-time buyers to borrow more in relation to their income.
The latest data from the property portal shows prices have climbed 2.4 per cent for first-time buyers in the last year – far above the average 1.3 per cent across the country.
But in one area prices have surged some 10.2 per cent, as buyers flock to cheaper areas where they can get more value and space for their money – without a hefty stamp duty charge.
Mortgage brokers think the pressure to secure homes in these more affordable areas has sparked 'fierce' competition which is driving up price tags.
First-time homes outpace rest of market
First-time buyers are now buying homes worth £229,000, some 2.4 per cent more than this time last year.
That's compared to the average house price of £268,449, which has only increased by 1.3 per cent in the past year, Zoopla says.
Swathes of lenders including HSBC and Lloyds have improved their affordability criteria which means first-time buyers can now borrow as much as £39,000 more than they could previously.
This means they are stretching themselves and buying higher value homes in more affordable regions of the country.
Fierce competition between first-time buyers to secure their dream home in sought-after regions is also causing prices to surge.
Omer Mehmet, managing director of mortgage broker Trinity Finance, said: 'For first-time buyers, the property market is fierce.
'The fact that first-time buyer homes are rising faster than the rest of the market shows just how intense the competition is at the bottom end of the ladder.'
North east buyers see prices rocket
The price of a first-time buyer property is climbing faster than the overall market in nine out of 11 regions, the Zoopla data shows.
The north east has seen the biggest rise in the price of a first-time buyer property, going up some 10.2 per cent to £134,800.
And other northern regions are also seeing huge growth in the price of first-time homes.
Scotland's first-time buyers can expect to pay 6.4 per cent more than this time last year while in Yorkshire and the Humber its 6 per cent.
Values have also risen in the north west (5.1 per cent), Wales (4 per cent), the West Midlands (2.7 per cent) and the south east (2.1 per cent)
In the south west, prices have grown just 1.9 per cent while the East Midlands has seen just a 1.7 per cent rise.
Eastern England has seen prices edge up 0.7 per cent for first-time homes, less than the overall house price growth of 0.8 per cent.
And in the capital, first-time buyer prices plummeted by 2.4 per cent to £420,600 over the last year. Overall price growth in London has slightly increased by 0.2 per cent.
Stretched affordability in London and other southern regions - where house prices still remain far above the rest of the country – is pushing first-time buyers away from these areas to cheaper homes in the north.
As buyers have hit their affordability ceiling, they are moving away from the capital to more affordable areas, which has caused growth to cool.
Michelle Lawson, director at broker Lawson Financial, said: 'In the south east, property prices are steady and first-time buyers are active – but the market is on a knife edge.
'London is less attractive now due to the flexibility of working from home, making the outer perimeter regions and beyond more appealing and affordable than the big cities, which will then push up prices and demand.
'Sellers are holding out and digging their heels in on pricing.'
While first-time buyers typically target homes priced 15 per cent below average prices within local areas, in London and the south east they target homes some 21 per cent below the average, Zoopla said.
Stamp duty hike pushing buyers away from south
The end of the stamp duty holiday in April, which lowered the thresholds at which stamp duty is payable – has hit the south particularly hard due to higher house prices.
For first-time buyers, stamp duty wasn't payable on the first £425,000 of a property's price tag. But this has been lowered to £300,000, adding thousands of pounds to young buyers' home moving costs.
It means first-time buyers are now either house hunting elsewhere or delaying their move until they can stump up the funds.
Stamp duty calculator
How much tax would you have to pay on a home or buy-to-let?
Elliott Culley, director at broker Switch Mortgage Finance, said: 'It is unsurprising to see house prices in the south of England and London stagnating or reducing when compared to the rest of the UK.
'First-time buyers looking in these areas were hit substantially harder by the government's amendments to stamp duty.
'This has led to a cool down in this market as first-time buyers are having to save more money to cover the deposit and stamp duty before having the ability to move. As a result, buyers are being savvier when looking for their first house.'
Richard Donnell, of Zoopla, added: 'First-time buyers in London and southern England are looking for cheaper homes than a year ago despite the extra borrowing capacity.
'Large deposits and mortgage regulations mean a high household income is needed to buy in southern England where affordability remains a challenge and this is acting as a drag on house price growth across southern England.'