First-time buyers returning to the market

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by Kay Murchie

According to research from estate agent Spicerhaart, due to falling interest rates first-time buyers are returning to the market.

Interest rates were cut last week from 5.5% to 5.25%, it is widely expected that further interest rate cuts will take place this year.

First-time buyers are encouraged by this and Spicerhaart have reported a 2% increase in numbers last month. Currently, 30% of property purchasers are first-time buyers.

In addition, the research has discovered that the amount of people taking out loan-to-value (LTV) mortgages of more than 95% fell to 17%, compared to nearly 25% of mortgages in August.

Steve Cox of Spicerhaart said in the time leading up to the credit squeeze, there was an increase every month in people taking out mortgages with LTV above 95%. However, since August and the credit squeeze, this amount has gradually dropped.

Borrowers are finding higher deposits to put into their homes indicating not only that they are confident in investing an increasing amount of equity into property, but that lending has become more responsible added Mr Cox.

Mr Cox continued that first-time buyers are being encouraged by the reductions in interest rates but are not being deterred by the need to put down a larger deposit. This sort of confidence is essential in reigniting the property market.

Many borrowers had anticipated the cut with 29% of new borrowers opting for variable mortgage products last month in comparison to 22% in December.