First rung of property ladder most affordable for 4 years

Homes in Scotland are more affordable for first-time buyers than at any point for almost four years, according to research published today.

A combination of lower house prices and gradually improving mortgage availability has boosted the chances of securing a foothold on the property ladder in Scotland, Findaproperty.com has revealed.

First-time buyers north of the Border still need to stump up deposits averaging £20,568, but that figure marks a fall of £3,979 in the past two months, according to the property website.

The typical first-time buyer home in Scotland sold for £109,723 in October, compared with an average Scottish property price of £151,758 and with an average price for UK first-time buyer homes of £153,573. With first-time buyer properties such as one- and two-bedroom flats recording the biggest price falls, the deposits required have shrunk, even though lenders have tightened their criteria.

And a recent improvement in the availability of loans requiring just 10 per cent deposits suggests the outlook for first-time buyers may finally be brightening.

Samantha Baden, property analyst at FindaProperty.com, said: “First-time buyers in Scotland will be encouraged to see that mortgage lenders are willing to offer larger loans and the gap between average earnings and the cost of a first-time-buyer property has narrowed.”

However, Chancellor George Osborne delivered a blow for would-be buyers in his autumn statement yesterday by signalling an end to the temporary stamp duty holiday for first-time buyers.

The threshold from which stamp duty is charged for first-time buyers will drop from the current £250,000 back to £125,000 on 24 March next year. The Chancellor claimed the measure, introduced two years ago, had proved ineffective, rejecting calls for it to be extended.

Paul Smee, director general of the Council of Mortgage Lenders, said: “While the concession may not have stimulated additional demand, it was a significant help to home-owners entering the market and its removal runs counter to the themes of the new housing strategy. It is likely that we will see a bunching of eligible first-time buyer transactions early next March to beat the expiry date on the concession.”

However there were encouraging signs for the housing market yesterday when new figures showed a rise in both lending and house prices in October.

The Bank of England revealed that mortgage approvals last month reached their highest level since December 2009. The number of loans approved for house purchase hit 52,473 in October, up modestly from the previous month and above the average for the previous six months.

Meanwhile Nationwide Building Society reported a 0.4 per cent rise in house prices for October. The average UK house price edged up to £165,798, 1.6 per cent higher than a year ago.

But Capital Economics warned that the outlook remained “pretty grim”.

“The rising funding costs in the wholesale markets may soon start to feed through to a tightening in the supply of mortgage finance. Meanwhile, as recent falls in employment are extended this will further dent demand and may also lead to a rise in forced sales,” it said.

“As a result, further house price falls look more likely than not next year.”