The latest report from the Mortgage Advice Bureau indicates that the average house purchase deposit increased to over £80,000 during December. This is the highest figure recorded by MAB’s Mortgage Index since it started in January 2009.
Rises
A typical purchase deposit rose by 15% yearly to reach £81,721 in December. Similarly, the average purchase price for a property in December increased to £252,990 from £231,487 a year previously. This represented an increase of 9.3% annually.
Borrower traits also played a key role in rising deposits. The average buyers LTV dipped to 68.2% in December, an annual decline of 1.1% and the lowest level seen since 2010.
‘An inevitable repercussion of rising house prices is that higher deposits are required,’ observed Brian Murphy, head of lending at Mortgage Advice Bureau. ‘Those who cannot afford to put up more may find their choice of properties limited. However, those who were able to make a house purchase in December opted to pay a larger amount upfront by taking out a loan with a lower LTV. There are significant benefits to borrowing a smaller proportion of the purchase price, as rates and monthly repayments will be lower.’[1]
‘Demand in the housing market is yet to come off the boil, despite the current dearth in property supply. As a result house prices are likely to continue rising this year, bringing about affordability concerns which will particularly affect first-time buyers. A significant boost to the construction of new homes is needed to prevent some buyers being priced out of the property market,’ he added.[1]
Average House Price Passes £80,000 barrier
Worsening affordability
With deposit sizes rising, December was the third consecutive month of lesser affordability based on a typical purchase buyer’s income as a percentage of property prices.
This proportion stood at 15.3% in December, after a 2% yearly decline from the 17.3% seen in December 2014, with house prices overtaking salary increases.
In addition, the Mortgage Advice Bureau recorded a 2.9% slip in the average salary of homebuyers, from £39,983 in December 2014 to £38,820 in the last month. On the flip side, house values rocketed by 9.3% from £231,487 to £252,990 over the same period.
Access
Mr Murphy added that, ‘the fall in average salaries over the past year suggests those with slightly lower incomes are still able to access the housing market, despite the significant rise in house prices. This has been helped by rock bottom mortgage rates, which have fallen steadily over the past year. However, these low rates won’t last forever and if prices continue to rise faster than wages those with lower incomes may find it more of a challenge to become homeowners.’[1]
‘Government initiatives such as more affordable housing and the Help to Buy schemes go some way in helping those who are finding it difficult to fund a house purchase. However, income and house price growth needs to be more aligned to make homeownership a more realistic dream,’ Murphy concluded.[1]
[1] http://www.propertyreporter.co.uk/hero/average-house-deposit-passes-%C3%A3%C3%A2%C2%A280k.html