First-time buyers facing hardest ever battle

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by Kay Murchie

Despite house prices falling, mortgages are becoming harder to secure which means first-time buyers are facing a tough time currently.

There are now only 4,100 different mortgage deals on the market, compared with 15,599 last July. Furthermore, just a couple of months ago, loans of up to 125% of the value of a home were on offer but these have all been withdrawn.

This is according to research from the annual Roof affordability index published by the housing charity Shelter who said an impossible situation is being made even worse by Britain’s mortgage meltdown.

The decade-long housing boom shows that the price of an average first-time property increased from £52,674 in 1997 to £159,494 in 2007.

Furthermore, mortgage repayments used up nearly 21% of the average working household’s income in 2007, compared with 12% in 1997, according to Shelter.

Adam Sampson of Shelter said despite falling house prices, many lenders are increasing their mortgage rates, making an already desperate situation worse.

It means there is a generation of young people and young families being locked out of the housing market without a hope of ever sharing in the asset wealth of the generation before.

David Stubbs of the Royal Institution of Chartered Surveyors said the biggest issue for first-time buyers was finding a deposit.

Saving for a deposit is likely to remain the main barrier to entry to the market as lenders shy away from those buyers who only have a small amount of money to put down, added Mr Stubbs.

Abbey Mortgages has established that 1.1 million first-time buyers are delaying purchasing a home for at least the next 12 months. This is primarily due to the withdrawal of cheap mortgages and the decline in property prices.