by Mark Johnston
The UK housing and mortgage market are a lot different post credit crunch. The Financial crisis has left many lenders pulling out of the market altogether or tightening their lending criteria to such an extent that borrowers find it increasingly difficult to secure a loan.
First time buyers have been the hardest hit as lenders ask for at least a 30% deposit which effectively prices them out of the UK market. The number of first time buyers under 30 years old has fallen by 100,000 between the years 2006 and 2009. This shocking data backs up the fear that the size of deposits required to get a home loan are preventing first time buyers from getting a mortgage and subsequently creating a property price crash here in the UK.
First time buyers tended to step onto the property market in the UK using mortgages that only required a maximum of 10% deposit with some providers in the past offering 100% mortgages. Although the credit crisis has made these are a thing of the past the number of 90% plus mortgages fallen rapidly over time. Between 2005 and 2007, well over half of all first time buyers took out a 90% plus mortgage. By 2008 this had fallen to 44% and in 2009 only 14% of first time buyers have managed to secure a property using a 90% plus mortgage.
The number of loans available has plummeted by up to 90%. In the last four years the number of these sorts of mortgages have fallen sharply from 245,000 to 28,000. In order to get a mortgage first time buyers are now having to ask family and friend for support. A recent report by The Centre for Housing Policy at the University of York suggested that the average deposit in the UK is now £18,600 and in London this rises to almost £30,000 well over the average annual salary.
The UK Housing minister, Grant Shapps said: “With a house now liable to cost perhaps seven times someone’s earnings, it is no surprise that the average unsupported first-time buyer is 37 years old. This country is in danger of letting down the aspirations of a generation of homes do not become more affordable in the long term. So what is required now is a period of house price stability. A home should first and foremost be thought of as a place to live and bring up a family.”
To support this Mr Shapps has committed to reducing the amount of red type and burocracy within the industry which prevents developers from providing new affordable housing. He has asked for leaders in the industry to work with him and the UK government to re-design the planning system to make it easier and quicker.
A separate report by the Council of Mortgage Lenders suggests that between the months of July and August, the number of mortgages taken out by first time buyers reduced by 5% dropping to 18,300 totalling £2.3 billion.
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