The numbers of first time buyers are increasing, although still well below levels at the market peak in 2006, according to research from UK lender Lloyds TSB. Spending by first time buyers on fees and furnishings is estimated to have contributed £1.9 billion to the economy in 2012 and first time buyers supported a further 500,000 moves up the housing ladder, the research also shows.
Two years ago, Lloyds TSB launched the Local Lend a Hand scheme to support first time buyers and help local authorities get the housing market moving in their area. To date, these partnerships have helped more than 1,100 first time buyers take their first step on the property ladder with almost £125 million lent in mortgages.
Raising a deposit is a crucial challenge for many first time buyers and is highlighted by many as the key hurdle to buying their first home. Lloyds says that local Lend a Hand enables borrowers who could afford the mortgage repayment but are struggling to build enough savings, to buy their first home with a lower deposit than usually required by most mortgage lenders.
The first scheme was launched in Blackpool with first time buyers able to apply for a mortgage from 1 July 2011. Since then, there have been 53 schemes launched with 47 local authorities and more are set to join during 2013. With an average house price of £123,960 across the schemes, almost half, 47%, of these first time buyers bought a terraced property whilst 41% bought a semi detached property.
Some 78% of councils joining the scheme said Local Lend a Hand has had a positive impact in their area and 91% said they would recommend the scheme to other local authorities. Almost all the councils surveyed, 96%, said they are considering extending their Local Lend a Hand Scheme, with many having done so already. Almost two thirds, 64%, are also setting aside further funds to help first time buyers in their area.
Quote from PropertyCommunity.com : “First time buyer numbers in the UK are at their highest since 2007 but they are still nearly 50% lower than in 2005 before the global economic downturn, new research shows.”
Each first time buyer also makes an average additional spend of £8,000 when buying a property, taking into account moving costs and furnishing their new homes. Add in stamp duty and the total amount spent in 2012 equated to an estimated £1.9 billion. First time buyers spend, on average, around £3,000 in legal fees, valuation fees and other costs. In 2012, first time buyers spent an estimated £635 million on these moving costs, some £68 million more than in 2011. By comparison, first time buyers spent £585 million a year on moving costs at the trough of the housing market between 2008 and 2009.
Furnishing a first home also adds to the expense. Spending on household durables such as white goods, curtains and carpets as well as home improvements is estimated at an average £5,000. First time buyers spent a total of £1 billion in 2012 on such items which is £115 million more than in 2011. The 2012 spend is half than the estimated £2 billion in 2006 but slightly more than the estimated £960 million in 2008. During 2012, it is also estimated that first time buyers generated £270 million in revenue for the Exchequer through stamp duty.
‘There can be no doubt that first time buyers have a significant economic impact. However, it has been a difficult time to take that first step on the ladder with many struggling to raise the required deposit,’ said Marc Page, Lloyds TSB mortgage director. ‘We are proud of the success the Lloyds TSB Local Lend a Hand schemes have already achieved. Working with councils to help first time buyers in their area is already having a significant impact at a local level and is helping to get their housing market moving again,’ he added.