First-time buyers struggling to get onto the property ladder

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by Kay Murchie

The decline in buyer interest has been the highest amongst first-time buyers, numbers are down 4% on that of the previous year. First-time buyers are finding it increasingly difficult to get onto the property ladder. Generally, first-time buyers are now having to borrow more than 3 times their income and are paying mortgage interest payments close to income seen in the early 1990’s. However, it’s not just first-time buyers who are affected.

In March, the number of loans to home movers fell below that of the previous year. Approvals for advances have also fallen to the lowest level since 2001 which proposes that higher interest rates are reducing the attractiveness of removing equity to finance home improvements and general spending.

The impact of interest rates on activity has not been evenly distributed across the UK. Activity continues to be strong in London and the South East, Scotland and Northern Ireland where a number of special factors are supporting demand. Also the supply of property is greatly constrained in London and the South East.

Annual house price growth is close to 10%. In Northern Ireland it is 50% and close to 14% in London and Scotland, but around 7% to 8% in the Midlands and northern regions. The upward momentum has eased a little since the end of 2006. The annual rate of house price growth typically averages 6-9 months after a peak in mortgage approvals for house purchase, so it should start to slow down during the latter half of 2007.