According to an analysis of affordability searches and results done by brokerage platform Acre, first-time buyers are borrowing “significantly higher” maximum loan sizes compared to what they have requested, going from 1.49 times the requested loan size to 1.57 times over the last three months.
The report said this shows an “increased willingness on the part of lenders”.
Acre found that first-time buyers are borrowing around 5% more than the same period last year, with the average loan size in the first half of the year coming to £240,299, compared to £227,717 in the same period last year.
However, the research showed that despite the rise in borrowing, borrowers were “struggling to keep pace” with the average house price increase of 6.7%, and loan-to-value (LTV) ratios were dropping for first-time buyers.
Looking at shared ownership, the average loan agreed comes to £111,890, with a loan-to-income (LTI) value of 2.46 times rather than the 3.4 times typically seen for those borrowing without shared ownership.
There is also a “stark” North/South divide regarding how far first-time buyers have to stretch themselves.
The highest LTI figures are found in London and the South East at 3.65 times, with the average first-time buyer loans exceeding £250,000.
This compares to the rest of England, where the average loan size is less than £189,000.
Northern England shows “more cautious borrowing”, with first-time buyers typically not going beyond 3.2 times LTI, and all areas except Cumbria and Newcastle having an average LTI well under three times.
Looking at the Midlands and Southern England, Acre said it was a “mixed picture”, with “pockets of low borrowing on income but overall representing some of the highest”.
Scotland shows a lower 2.86 times LTI ratio, yet the percentage of loan to property value is among the highest in the UK, with first-time buyers borrowing an average of 82% of the property’s value. The average loan for first-time buyers in Scotland is now £167,508.
Wales also sees first-time buyers borrowing a large proportion – 82.2% – compared to property values, with regional variations, and an average loan of £180,013.
Justus Brown, CEO and founder of Acre, said: “Our findings lay out the crippling affordability challenges faced by many first-time buyers, being forced to borrow more, particularly in areas with a strong jobs market and in emerging expensive rural locations. Brokers are constantly navigating these choppy affordability waters for their clients, equipped with the responsibility of securing the best-suited mortgage without putting any undue pressure on them.”
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