First-time buyers look at higher priced homes after mortgage shake-up

First-time buyers in the UK have been looking at higher-value homes as mortgage affordability has improved, according to Zoopla.

The property website found that, as of July, first-time buyers were looking at homes that were 2.4% more expensive than a year earlier, at an average price of £229,000.

The findings, published on Thursday, were based on an analysis by Zoopla of the asking prices that were most popular among first-time buyers.

Its analysis showed that house prices overall had grown by 1.3% on average, and while this pace of growth was slower, the typical cost of a home across the wider market was still higher at £268,449.

Zoopla explained that mortgage affordability had improved over the past six months, giving all buyers using a mortgage 20% more borrowing power. It said that this was one reason behind a 30% increase in first-time buyer mortgages and also explained why were now targeting higher value homes in more affordable regions.

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First-time buyers account for around two-fifths (39%) of all house sales every year and half (49%) of all new mortgages for home purchases, according to Zoopla. Its data showed that 45% of first-time buyers were focused on buying three-bedroom houses, while interest in flats had decreased to 29%.

Zoopla found that first-time buyer house prices had risen faster than the overall market in nine out of 11 UK regions. This faster pace of growth was found to be most pronounced in the North East, where first-time buyers were looking at homes that are 10.2% more expensive than a year ago, with prices having risen to an average £134,800. That compared to a rise of 2.4% for the wider market to 146,600.

Scotland came in second place, with the cost of a first home rising by an average 6.4% over the past year to £146,600, compared a 2.1% increase in the wider market to £170,000.

In Yorkshire and Humber, the price of a typical first home rose by an average 6% to £167,700, compared to a 1.9% rise in the broader market to £192,500.

In London, where property is much more expensive, Zoopla found that first-time buyers were looking at home that are 2.4% cheaper than a year ago, though the average price was still £420,600.

Zoopla said that first-time buyers typically to target homes that are 15% cheaper than the average price within the local area. The property website said that they tend to target house prices that are 21% below the average in London and the South East and 17% in Wales.

Richard Donnell, executive director at Zoopla, said that despite the recent boost to mortgage affordability more broadly, first-time buyers in London and southern England are still looking for cheaper homes than a year ago.

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"The ending of stamp duty reliefs since April has added to the cost of buying a home for first time buyers," he said. "Large deposits and mortgage regulations mean a high household income is needed to buy in southern England where affordability remains a challenge and this is acting as a drag on house price growth across southern England.

"The variation in affordability explains why first time buyers across England are looking to buy three-bed houses while in London, one- and two-bed flats remain the primary target for those buying their first home."

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