Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Share of FTBs fall as lenders drop high LTV mortgages

LTV mortgages

According to the latest Zoopla House Price Index, the reduction follows a 10-year high in the share of first-time buyers recorded in 2019

The share of homes purchased by first-time buyers in the UK has fallen for the first time in five years, according to the latest Zoopla House Price Index.

The research shows their ability to buy property is starting to be hit by COVID-19, the recession, and reduced availability of higher loan-to-value mortgages.

The drop-off in demand correlates directly with when lenders started to withdraw high LTV mortgage products in early June.

The reduction follows a 10-year high in the share of sales to first-time buyers recorded in 2019, when around a fifth of all mortgages for home purchase were at or above 90% LTV.

The findings from Zoopla suggest the remainder of 2020 and the start of 2021 are set to witness a reversal of that trend, with a greater share of moves by existing home-owners who tend to move less often.

Looking at it on a regional basis, the figures show that demand among first-time buyers has grown the least in London (1.8%), Yorkshire and the Humber (+4.8%), and the North West (9.7%) in September 2020, compared with the first quarter of the year.

In London, 90% LTV lending is limited to those on high incomes or those with larger deposits. Overall, first-time buyer demand in London is just 1.8% up in comparison to demand from existing homeowners, which has increased by 41% compared with Q1.

First-time buyer and existing homeowner demand has diverged the most in the South-East (48.5%), Scotland (46.4%), and the South-West (44%) since the start of the year.

House-price growth continues on an upward annual trajectory of +2.6% as demand outpaces supply. At a region and country level, the annual rate of growth ranges from +1.7% in the North-East to +3.3% in the North-West, Yorkshire and the Humber, and Wales. Nottingham and Manchester are recording price inflation of more than 4% per annum.

Richard Donnell, research and insight director at Zoopla, said: A change in the mix of buyers is supporting market conditions with sustained demand from equity-rich existing owners seeking more space and a change in location.

He said, in contrast, first-time buyer demand is weakening. FTBs have been a driving force of housing sales over the last decade. They remain a key buyer group but lower availability of higher loan-to-value mortgages and increased movement by existing home-owners means a shift in the mix of home buyers into 2021.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.