First-time buyers receding from Australian mortgage market

The proportion of first time buyers in the Australian market has fallen to its lowest level in 11 years. The reported data also showed that while new issuance of home loans surprised on the upside, increasing slightly in November, the ratio of first time buyers fell to 14.9%, the lowest level since June 2004. “With property prices very high in some cities, especially in Sydney and Melbourne, this is stopping young Australians from taking a home loan and entering the property market,” said Amanda Watt, Head of Banking Business Act. This trend is also apparent in the UK housing market where the number of first-time buyers has fallen for the first time in four years. This is partly due to a lack of supply and the large deposit required to buy a home.

The number of first-time buyers in the UK housing market has fallen for the first time in four years, with the typical deposit required to buy a property now above £30,000.



The estimated number of first-time buyers last year was 310,000, down 0.5% on 2014 and the first decline since 2011, according to Halifax.

The decline is partly due to the lack of supply of homes for buyers to choose from and the increase in the deposit needed to buy a home. The average deposit for first-time buyers rose 13% from £29,094 to £32,927 in 2015.

In London, the average first-time buyer now needs to find around three times this amount to get on the property ladder. The average deposit in the capital was £91,409.

First-time buyers raised larger deposits and took on longer mortgages than their counterparts in previous years to be able to afford the monthly repayments, according to Halifax, the UK’s largest lender.



A quarter of first-time buyers in 2015 took out mortgages stretching over 35 years.

Despite a fall in the cost of mortgages for those with small deposits, and lenders’ increased willingness to offer deals to first-time buyers, those trying to purchase had to find more to keep up with rising prices. The average cost of a home bought by a first-time buyer increased by 10% in 2015, to £190,180.

Since the property market reached its last peak in 2007, the average first-time buyer deposit has risen by 88% from £17,499. At that point, loans of more than 100% of a property’s value were available from some lenders.



Over the same period Halifax reported a marked increase in the proportion of loans arranged over a period longer than the traditional 25-year term. In 2007, 16% of first-time buyers took their loans out over 35 years, but by 2015 that had risen to 26%. The share of mortgages with a 20- to 25-year term fell from 48% to 30% over the same period.

Although the number of first-time buyers was down on 2014’s figure, it remains 60% up on 2011’s figure and is in line with the rest of the residential market, Halifax said.

David Hollingworth of mortgage brokers London & Country said first-time buyers were having to find larger deposits to bridge the gap between the mortgages they could afford on their earnings and increasing house prices.



“While it sounds like a bad thing to do we should remember that in the past some first-time buyers were taking out interest-only mortgages without repayment vehicles to reduce their monthly costs, thinking they would worry about it later – it has to be better to take out a repayment mortgage over a longer time,” he said.



“The downside is that over the whole term it does cost a lot more if you take out a longer mortgage.”



Craig McKinlay, mortgages director at Halifax, said: “Although the average price of the typical first-time buyer home has grown by 10% in the past year, the number of buyers taking that first step onto the housing ladder has been supported by favourable economic conditions; namely, record low mortgage rates, rising employment and real pay growth.”