First Time Buyers Out in The Cold This Winter

by Mark Johnston

The council of mortgage lenders (CML) figures show that per month approximately 17,000 would be first time buyers are being left out in the cold.

Banks approved 6% fewer house purchase mortgages for first time buyers in September 2011 than in the previous month of August. Strict lending criteria and absurdly high deposit requirements are continuing to keep mortgage finance out of the reach of the average first timer.

Access to lending is still proving to be a real barrier for first time buyers.

With first time buyers unable to get on to the property market they are flooding the private rental sector which in turn is driving up the competition for accommodation in the rental market. These conditions are too attractive for many investors to ignore and there for there is high growth in buy to let investment and high rental demands. All this put most first time buyers in a catch 22 position.

However there has been some much needed relief for the first time buyer who can raise a deposit, with an increase in the number of affordable mortgages.

Figures from moneysupermarket.com show that there are at present approximately 312 deals from lenders that require a mere 10% deposit. These 90% loan to value (LTV) deals are at the highest levels since 2009 when the recession first started to bite.

The council of mortgage lenders (CML) data has shown that borrowing activity for first time buyers was at its highest in June 2011 for 10 months; however it was still 6% lower than in June 2010.

Analysts state that there has been little change in lending criteria, with first time buyers paying on average deposits of 20%, although these deposits are lower than the 25% required in 2009 and 2010.

The national association of estate agents (NAEA) has stated that 22% of homes sold recently were to first time buyers, an increase of two percentage points. They also added that there has been a slight increase in first time buyer activity, but there are widespread regional variations.

It is still clear that many would be first time buyers who are still hopeful of getting on to the property market do not expect to be in a position to do so until they are at least 38 years old.

New research from smart new homes found that one in ten first time buyers are now prepared to use a bank loan or even a credit card to raise their all important deposit. This research also found that failing this many first timers intended to turn to the ‘bank of mum and dad’ and if that is not an option around 5% will be forced to sell a personal asset such as a car just to own their own home.

Steve Lees, director at smart new homes stated that: “regardless of the fact that house prices have fallen, first time buyers still feel homes are out of reach and with renting becoming increasingly more expensive they are resorting to credit cards and bank loans as a way of getting on to the property ladder.



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