Affordability ratios soften for first-time buyers

Potential first-time buyers are in a stronger position to purchase a home than at any time in the past five years.

According to Halifax, the first-time buyer affordability ratio has steadily improved during 2008 and the trend should continue in 2009.

Research from the lender indicates that the average house price to earnings ratio has fallen from a peak of 5.84% in July 2007 to 4.56% in November 2008.

It is now back to the level seen in July 2003 and given that the ratio is worked on a single income first-time buyer, couples are even better placed.

Halifax chief economist, Martin Ellis, notes that while there has been a marked improvement in housing affordability in many parts of the UK, first-time buyers outside the south of England and the Midlands are particularly feeling the benefit.

In November, the number of local authority areas where a single first-time buyer on average earnings could afford to buy a home increased to 14% (from 4% in 2007).

For Scotland the change has also been marked, with 67% of local authorities affordable to a single first-time buyer on an average salary, compared to 30% in 2007.

However, affordability ratios are not the only challenge faced by first-time buyers, the majority of whom have to struggle to raise a substantial deposit before they can secure a mortgage.

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