It represented a 3.3% monthly increase in purchase price, equivalent to a jump of £5,000.
This increase in purchase price has driven a rise in deposit size. The average first-time buyer deposit rose to £27,519 in January 2014 – from £26,963 twelve months before.
And for the first time in seven months, deposits are growing as a proportion of income. The average deposit represented 75.1% of a first-time buyer’s income in January 2014, up from 74.7% in December 2013.
This was the result of the differing speeds of recovery in the economy. While house prices have raced ahead, wages have been much slower to pick up.
The latest ONS statistics showed total pay increased by just 1.1% over the year to December. Factor in inflation, which tracked at 2% over the same time period, and real wages have actually been falling. Deposits are forming a larger proportion of take-home pay.
David Newnes, director of estate agents Your Move and Reeds Rains, part of LSL Property Services group, said: “While the property market has been firing forwards, wage growth has been stuck in the mud of the economic recovery. Prices for first-time buyer properties have been marching steadily upwards, and have now reached a new record.
“The property market has remained accessible to first-time buyers, because an increase in high LTV lending has offset rising prices. This is enabling more first-time buyers to enter the market.”
High LTV lending is helping first-time buyers enter the market, as prices – and deposits – increase. The average first-time buyer LTV has risen 2.5% over the past year to 82.3% – the highest on record.
The number of first-time buyer transactions is a third (31%) higher than in January 2013. There are also strong signs that first-time buyer transactions will pick-up further in February.
The latest e.surv Mortgage Monitor showed that lending to borrowers with a deposit of 15% or less – typically first-time buyers – bounced back from a festive dip in January.
High LTV borrowers accounted for almost one in seven (14%) house purchase loans in January, up from one in eight (12%) in December. This increase in high LTV lending should filter through to even more first-time buyer transactions in February.
Newnes added: “Although Mark Carney has revised forward guidance and assured borrowers that a base rate rise isn’t imminent, we still need to support the bottom of the market.
“As first-time buyer house prices continue their upward climb, Help to Buy is needed more than ever to keep the market accessible to all. But the market needs more than that. Far more house-building must come hand-in-hand with more high LTV lending.
“More building will ensure Help to Buy doesn’t become a permanent crutch to the market; we need to increase our stock of affordable homes and reduce the competition between buyers to ensure a sustainable recovery.”
London and the South East were home to 38% (28,100) of UK first-time buyer transactions – 13,000 in the capital and 15,100 in the South East.
The average deposit was £64,160 in the capital and £39,146 in the South East, considerably higher than in all other UK regions. By comparison, the average first-time buyer deposit was just £13,393 in Northern Ireland and just £13,814 in Wales.
First-time buyers also paid the most for their homes in London. The average first-time buyer purchase price rose to £282,537 – a new record. The cheapest region was Northern Ireland, where the average first-time buyer purchase price was just £87,839.