First-time buyers are still flooding back to the property market, lured by lower interest rates and the Government's mortgage subsidies. Transactions numbered 27,800 in November, up 28 per cent on a year earlier, according to the latest survey by LSL Property Services.
The average deposit handed over fell to £27,942, down from £28,045 in November 2012, and the deposit as a portion of income dipped to 76.6 per cent, down from 82.4 per cent. Most significantly, the average initial mortgage interest rate was 3.93 per cent, down from 4.72 per cent a year earlier.
"Mortgages are much more affordable, which has opened the door to thousands of aspiring homeowners who had previously been locked out of the market," said David Newnes of LSL Property Services.
But Mr Newnes warned that weak supply of new housing was likely to push prices higher, making the market more dysfunctional. "If demand is not satisfied by supply, then sustainable growth will be hampered and future first-time buyers will once again be left out in the cold. We need far more homes at the lower end of the spectrum if we are to sustain a healthy property market".
The prices paid by first-time buyers are also rising. The average purchase price in November was £149,000, up from £134,000 a year earlier. Average mortgage repayments as a share of income rose to 21 per cent in November, the highest level seen so far in 2013.
In further evidence of the property market rebound, homeowners are slowing their pace of mortgage deleveraging. Figures from the Bank of England released yesterday showed the public injected £10.4bn of equity into their homes in the third quarter of the year. This was £2bn less than in the previous three months and the lowest amount since the fourth quarter of 2009.
The consumer boom of the last decade was supported by people withdrawing equity from their homes. That went into sharp reverse in the 2008/09 financial crisis as the public suddenly sought to reduce their mortgage debt as a proportion of their incomes.
The economy's return to robust growth has been helped by households reducing their savings ratio. It fell to 5.4 per cent of disposable income in the third quarter, down from 6.2 per cent in the second.
The Bank of England's Financial Policy Committee knocked out some of the incentives to mortgage lending by banks under the Funding for Lending Scheme this year to avoid the risk of a housing bubble. But the Government's Help to Buy subsidies, which guarantee 15 per cent of mortgages granted to people who can pay only a 5 per cent deposit, stays in place.