Calm in the storm for first-time buyers

08-Feb-2008

Despite the distinctly gloomy conditions that the housing market has endured over the past few months, first-time buyers may be lucky enough to reap some benefits.

With a steady fall in house prices and an increase in one and two-bedroom flats being put up for sale, many have felt the time right to enter the market.

Figures from the National Association of Estate Agents have shown that first-time buyers increased from 10.1 per cent in November to around 13 per cent of the market in the following month.

Whereas the interests rate cuts of December offered little in the way of benefits due to it following five increases, this weeks cut should offer a more encouraging outlook for those looking to own their first property.

Additionally, if first-time buyers are still struggling to be able to borrow enough to buy a property outright, they may want to look toward the government's HomeBuy schemes which is an opportunity to buy an equity stake in a new property while paying a reduced rent on the remainder.

This kind of scheme allows the buyer to purchase a minimum of 25 per cent of the property and also pay up to 2.75 per cent of the value as rent, with the option of increasing their share as and when they feel they can afford it.

Getting together as bigger a deposit as possible is also solid advice for the first-time buyer, as it will allow you to get the best deal on a mortgage.

Ray Boulger of mortgage brokers John Charcol notes that there is currently less competition for mortgage business so buyers wanting to borrow 100 per cent of the purchase price will find themserlves paying more.

Commenting on the current situation, Mr Boulger said: "If nothing else, the house price boom finally seems to have come to a halt, which means buyers can afford to wait. At long last time is on their side."

Separate data from the broker has also found that applications for joint mortgages increased last year with joint applications accounting for some 50 per cent of first-time purchases as compared to 45 per cent the previous year.

Commenting on the trend, Katie Tucker, technical manager at John Charcol, said: "It follows that not only are more women buying, they are doing so jointly, and more men are also taking the decision to settle down with a partner for their first home. Buying together is a very sensible choice in terms of affordability."

She also noted that December's base rate increase meant that mortgage repayment s may be a little daunting for the lone buyer, so joint buying mad good sense.

While this week's cut should go some way to easing affordability for first-time buyers, Ms Tucker also advised that renting for a year is a good option to make sure that you get on in a shared household.

The Intermediary Mortgages Lenders Association (IMLA) also notes that the credit crunch has not affected mortgage borrowers as was first feared, noting that it is reassuring that the number of customers facing arrears or the threat of repossession is significantly below the levels forecast.

The group has said: "IMLA would echo the Council of Mortgage Lender's comments, which any borrower facing potential payment problems should speak to their lender at an early stage, as that gives the best opportunity of finding a way to enable them to stay in their home."

Arrears and repossessions should remain below the peaks of the 1990's, the group has predicted, which will be reassuring for first-time buyers who may be feeling apprehensive about entering the market.

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