First-time buyers taking a risk by using debt for deposits
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by Kay Mitchell
A report has revealed that 30% of first-time buyers are finding a deposit for their first house by using unsecured loans, borrowings and credit card debt.
A study by iammoving.com, the online change of address service, discovered that 13% of first-time buyers were taking out an unsecured loan or credit card debt to raise the deposit which is likely to be around Â£10,000 to Â£15,000.
The withdrawal of cheap mortgages and the 100% mortgage has meant that first-time buyers need to raise a large deposit in order to get onto the property ladder.
Just 42% of those who are in the process of buying a property or have just purchased a property did so by the best method – using their savings. 17% are borrowing the money from friends or relatives.
Of the 250 first-time buyers questioned, 7% are using shared ownership, 9% have dipped into an inheritance while 5% are selling items such as their car in order to get onto the property ladder.
Simon Preston of iammoving.com said there had been a slowdown in first-time buyers but the survey showed that getting on the ladder was still a priority for many, no matter how it was done.
There is a huge risk in taking out unsecured borrowings to raise a deposit as a first-time buyer. A small shift in prices and a change in circumstances can see someone losing their house and financial security very quickly, concluded Mr Preston.
According to the National Association of Estate Agents (NAEA), the number of first-time buyers in the UK property market fell significantly in March 2008.
The trade bodyâ€™s latest report established that first-time buyers accounted for 11.7% of all property purchases in February, this had fallen 3.4% to just 8.3% in March – this represents the lowest figure since April 2006, when 7.9% was noted.
The fall reflects the uncertainty surrounding the UK property currently as house prices continue to fall and a slump in mortgage lending was announced by the Bank of England.
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