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House prices rise £1000 per month since April

First-time buyer prices declined from almost £176,000 in January 2008 to less than £153,500 in June 2009, making it significantly easier for first-time buyers to get on the housing ladder – if they could secure a mortgage and raise the deposit they need.

In fact, first-time buyers in January 2008 were faced with raising more than £71,000 in deposit once they had secured their loan – but this had been cut to £56,400 by June this year. This meant that rather than needing to raise the equivalent of 2.3 times their gross household income, they only needed to find 1.7 times income – still a tidy sum, but a step in the right direction.

However as first-time buyer house prices start to creep up, 0.3% month on month to £154,613 in October, and with lenders’ underwriting criteria still tight, this "affordability gap" is starting to widen. The £56,400 deposit needed in June has now become more than £58,000 in October – 1.7 times income.

If the trend of rising house prices continues, prospective first-time buyers may need to consider seriously whether the time is right to buy, not least as the Government’s £175k stamp duty holiday which provides an additional financial incentive comes to an end on 31 December.

Michael O’Flynn, director of FindaProperty.com, said: "It’s never easy to get on the housing ladder but until the summer we had been seeing a gradual narrowing of the affordability gap. This has led to a definite pick-up in first-time buyer activity as people have taken advantage of improved affordability and the stamp duty exemption on properties priced under £175,000. 

"With prices now rising and affordability tightening again it becomes even more important that the Government retains this beyond its end-date of December 31. We would also like to see lenders begin to respond to the strong demand and support the recent recovery by making finance more accessible to the many people looking to make a move."

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