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Drop in mortgage rates boosts buyers number

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The number of first time buyers in the United Kingdom rose 45 per cent year on year in July, thanks largely to a sharp fall in mortgage rates making homes more affordable.

According to Propertywire.com, there were 26,100 first time buyer sales in July, 8,100 more than 12 months ago, the highest number of first time buyers since November 2007, according to the latest First Time Buyer Monitor from LSL Property Services.

It is an indication that the improvement in the first time buyer market is gathering even more momentum with a sharp increase in the affordability of mortgages driving the improvement, the firm said.

The average mortgage rate fell from 4.92 per cent in July last year, to 3.99 per cent this year, attracting more buyers to the market. Rates have now fallen every month for the last year, as banks are passing cheap credit from Funding for Lending onto borrowers.

The cheaper rates meant that mortgages were more affordable for first time buyers. The proportion of income represented by mortgage repayments fell year on year from 21.6 per cent to 20.4 per cent.

But there are warning signs ahead, with rapidly rising house prices threatening to price the next wave of first time buyers out of the market. Deposits now represent a far greater proportion of the income of a first time buyer, and are rising.


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