According to a Mortgage Solutions poll, around 31.5 per cent said that they had seen more first-time buyer clients on higher incomes in the last 12 months.
However, 34.2 per cent said they had not seen this trend and a further 34.2 per cent said that levels of first-time buyers with higher incomes were about the same.
Recent research from Rightmove showed that the average first-time buyer property price rose to £224,963, a new high for the index.
Zoopla figures also show that first-time buyers need an extra £7,350 of gross income to buy a three-bed house, and an additional £4,9000 for a two-bed home.
‘Even split’ not surprising
Stephanie Daley, director of partnerships at Alexander Hall, said that to see an “even split is perhaps not surprising” given variable such as rental cost increase, variance of wage rises, inflationary pressures, mortgage rate changes and changing market sentiment.
She continued that as a business it had seen an increase in first-time buyer enquiries which coincided with mortgage rates falling to four per cent from 4.5 per cent in late February and early March.
“Though many have seen earnings increase, the challenge of mortgage affordability still remains and we have seen this challenge increase for certain income brackets,” Daley noted.
Daley said that understanding “optimal budget” was key as some lenders could give higher income multiples for first-time buyers, although that was dependent on overall application and income.
“The higher the application income the more likely the applicants are able to attain those. It is important for first-time buyers to keep in touch with their mortgage advisors because maximum affordability can change regularly, due to background stress test changes and lenders updating ONS figures on their calculators,” she said.
Nicholas Mendes, mortgage technical manager at John Charcol, agreed that results should even out, as some households had seen their expenditure grow and others had not had a salary increase in the past few years.
He cited ONS figures from April last year, which showed that median weekly earnings for full-time employees went up by five per cent compared to the previous year, meaning that the average person took home £640 per week, or approximately £33,280 per annum.
Mendes added that rising property prices might make first-time buyers “feel that the prospect of property ownership is out of reach”.
“We have seen a growing number of first-time buyers looking to purchase via non-traditional routes such as auction, self-builds, or looking at customer builds such as conversion for a commercial to residential usage,” he noted.
Affordability still ‘big issue’
David Hollingworth, associate director for communications at L&C Mortgages, said that the “big issue” for first-time buyers was affordability, as rising house prices in recent years made it even more challenging to raise a deposit.
“Despite a softer market, prices will still pose a big stretch for many first-time buyers. With the cost of living rises and higher interest rates, it could come as something of a surprise that the poll didn’t suggest the emergence of more higher income first-time buyers.
“The desire for home ownership does seem to be holding up in the first-time buyer market and perhaps the cooler market will at least be giving them a better chance to negotiate on price,” he noted.
However, Hollingworth warned that there needed to be a balance between an improvement in purchase price against the pressure on lender affordability that came with higher incomes.
“The cost of living crisis will have hit those on lower incomes harder and so we will see if that feeds through into the first-time buyer market with an increasing edge for those with higher incomes.
“The good news is that the poll results suggest that’s not yet the case and hopefully inflation will edge back to prevent that altering radically. With so many moving parts to consider, first-time buyers will need the help of their adviser more than ever,” he added.
First-time buyer confidence can ‘light a fire throughout the entire market’
John Phillips, national operations director at Just Mortgages, said that rather than feast or famine, brokers were supporting a “broad range” of first-time buyers.
He explained that some were still relying on the Bank of Mum and Dad but others found themselves in good-paying jobs but had “little to no capital”.
“That’s not forgetting all those somewhere in the middle,” he added.
However, he said that first-time buyers from across the income spectrum were seeking advice from the firm, especially since the start of the year.
“While first-time buyers in the main are pretty resilient, they’re not immune from being bogged down by the bad news cycle of the mainstream media. The reality is there’s plenty of reasons to be positive and to crack on with their plans,” Phillips noted.
He noted that a “clear challenge and opportunity” for brokers was “getting in front of as many people as possible to help them understand this”.
“Once people sit down with a broker, they not only get a real understanding of what’s going on in the market, but how it actually applies to their situation. If we can give first-time buyers the confidence they need, it will help light a fire throughout the entire market,” Phillips added.
Some broker firms seeing increase in FTB income
Greg Cunnington, chief operating officer at LDNfinance, said that it had seen an increase in first-time buyers with higher incomes in the past year.
He said that this was due to employers reacting to high inflation with “significant wage increases”, especially among big corporate firms.
Cunnington added that since the mini Budget, lenders had been coming out with affordability calculators which were more favourable for high earner so their options were less impacted from a maximum borrowing perspective.
He continued that market conditions and house price to earnings meant getting on the ladder without the Bank of Mum and Dad was “primarily now for higher earners, especially in our markets of London and the South East”.
“This is even more so now that the Help to Buy scheme is closed to new applicants which did assist many lower income clients in this space,” he added.
Chris Sykes, technical director at Private Finance, said that some brokers had seen an increase as affordability was a lot tighter compared to six months ago so “perhaps they are only counting successful first-time buyers and these needing higher incomes to afford what they want to buy”.
He noted that there had been a change in first-time buyers’ questions in the last six months, previously asking how much they could borrow and now asking how much they could borrow with a certain budget.
“Lots of people are now not stretching themselves as much as they potentially could do, or would have done, this time last year.
“One of those major challenges for many now is affordability and borrowing power, now lenders are stress testing debt at the current rates plus a margin for some circumstances what we could get clients a year ago vs now are vastly different amounts, I’ve had some clients able to borrow hundreds of thousands less with the same lender now vs a year ago,” Sykes said.
