Hefty deposits required in order to get onto the property ladder
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by Kay Mitchell
Research from mform.co.uk has discovered that first-time buyers looking to borrow more than 90% of a propertyâ€™s value will struggle to obtain a mortgage.
The online mortgage company found that mortgages for first-time buyers without a sizeable deposit are becoming scarcer with only Abbey and Halifax offering 95% loan-to-value (LTV) mortgage deals.
The majority of lenders require a deposit of 20% for many best buy mortgages, which is the equivalent of Â£37,000 on the average property. However, borrowers would also have to pay an arrangement fee of around Â£1,000.
Over the last year, property prices have fallen and the Governmentâ€™s decision to increase the stamp duty threshold should be of benefit to first-time buyers, but according to Francis Ghiloni of mform.co.uk, this is not the case unless they have a large deposit.
mform.co.uk recommends that first-time buyers sit tight and build a deposit and according to the National Association of Estate Agents, prospective buyers are following the advice after the percentage of property sales to first-time buyers fell to 8.3% compared to 10.7% in June.
Todayâ€™s figures from the British Bankersâ€™ Association (BBA) revealed that UK mortgage lending by the major banks fell to a fresh low in August.
Some 21,086 mortgages were approved during August, 64% lower than in August 2007. The figure represents the lowest since the BBA started gathering data in 1997.
According to David Dooks of the BBA, falling property prices and the current economic downturn would continue to have an impact on mortgage lending.
Furthermore, research from the Co-operative Bank has established that 25% of would-be homeowners are postponing marriage and starting a family in order to save up for a deposit.
Victoria Drummond of the Co-operative said the research shows that owning a home is now unattainable for many as they struggle to save a deposit against a backdrop of rising food and energy costs.
Ms Drummond concludes by saying it is crucial that Government and the housing industry continue to offer products that provide first-time buyers with essential financial support required in order to get them onto the property ladder.
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