by Mark Johnston
Over the last few years the rules in the mortgage industry have become extremely complex and convoluted and it has become quite difficult for homeowners to keep track of changes and the pace of change has been a daunting obstacle for any first time buyer to attempt to overcome. It has also been very difficult for customers on the mortgage ladder, not just those who have joined the market.
With the Bank of England maintaining low interest rates recently, the lowest interest rate for the last two years, and the support of the market place with Loan to Value mortgages back to between the 10 – 20 per cent value, it is apparent that there is a opportunity to motivate and provide incentives first time buyers to get into the housing market with earnest. The buy-to-let market, in comparison, has gained an advantage in the past few years.
Landlords have been seeing the world through rose tinted glasses while the rest of the market is feeling the squeeze. The last few years has seen a sharp rise in demand for rental properties, Government figures have shown nearly a 300,000 rise of privately rented accommodation being taken up by households in England. The demand for rented accommodation was at an all time high in 2010 and it appears to have remained at that level for the first part of 2011.
Nearly a third of landlords have raised their rent this year, 32 per cent exactly. Great news for landlords but not such good news for the first time buyers hoping to gather a initial deposit for their first property.
There are a few reasons that the landlords have come out on top recently. Firstly, as mentioned already, the wider UK economy is not doing the first time buyers any favors. This said the Local Lend A Hand initiative should help and with Five local authorities, including Warrington, Blackpool, Newcastle under Lyme, Northumberland and East Lothian piloting this new initiative, we should see first time buyers require only a 5 per cent deposit with a top up from their local council.
A recent survey, commissioned by an insurer, revealed that 75% of Ministers of Parliament (MPs) feel that people, with stable incomes and can afford repayments should be helped onto the property ladder. So there is a definite political appetite to helping the first time buyer.
Inflation is the next reason. High inflation, currently sitting at 4.4 per cent for February, is making families and individuals tighten their budgets all over the country. With tighter budgets come slimmer savings, thereby taking the first time buyer a longer time to reach their targeted initial deposit value. The longer that takes the first time buyer, the longer they sit in the rented property and the longer the landlord rakes in the rent, paying off their own mortgage in the mean time.
The last reason the landlords are doing so well is that even if you get yourself a deposit, there is no guarantee that you will be offered a mortgage. The credit crisis has forced lender to take a long hard look at how they do business and with whom they do business. This may very well denote that a mortgage may be out of the financial means for many people today. This appears cruel but do remember that it was irresponsible lending practices that got us into a mess in the first place.
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