The affordability of homeownership for first time buyer mortgage customers has been improved by a combination of lower house prices, the new stamp duty rules, and a record low base rate.

Some of the constraints that have kept homeownership out of reach for many are being lifted, according to research from Halifax, which found that eight out of 10 first time buyer mortgage applications were approved in the first half of the year.

Consequently, the proportion of first time buyers’ income spent on monthly mortgage payments fell to 28 per cent in June, nearly half the level it was in 2007 when it was 50 per cent, and below the 34 per cent average of the last 25 years.

Halifax has calculated that there were 28 per cent more first time buyers in the mortgage market during the first six months of 2010 than in the same period last year, although this is still half the number there were in 2007.

Since the new Government changed the stamp duty rules to make first time buyers exempt from paying it on properties of up to £250,000 for two years, 94 per cent of first time home buyers have not had to pay it.

But, despite the increase in affordability, many would-be first time buyers are still hesitant to step onto the property ladder, with only 35 per cent of first time buyers taking advantage of the low house prices and interest rates.

More than half of potential homeowners surveyed said that affordability is the primary reason they have yet to enter the market, and the tightening in lending criteria since the credit crisis struck in 2007 has deterred many first time buyers from trying to get a mortgage.

But competition is improving in the mortgage market, with lenders offering higher loan to values again, and only three per cent of first time buyers cite a lack of mortgage availability as their reason for not entering the market. 

Some lenders, such as Skipton, are now offering up to 95 per cent LTV mortgage deals, requiring a deposit of just five per cent.

Commenting on the results of the research, Stephen Noakes, commercial director for Halifax mortgages, commented: “We believe it’s important that first-time buyers understand that whilst there are still challenges in raising deposits, other market conditions are more positive. 

“Affordability has significantly improved, meaning the amount of a typical first-time buyer’s monthly pay packet that needs to be dedicated to their mortgage is now below the 25 year average and importantly, despite perceptions, eight out of ten first-time buyer mortgages are approved.”

© Fair Investment Company Ltd