Credit squeeze still an issue for first-time-buyers

09-Jan-2008

The turmoil affecting the international money markets will continue to be an issue for people looking to get on the property ladder, experts have warned.

While house prices are expected to slow this year and the Bank of England is set to reduce the cost of borrowing, people looking to get their first foothold on the property ladder might still face difficulties.

The credit squeeze has prompted lenders to tighten their terms, with fewer attractive offers on the market.

This could mean that even lower asking prices and further cuts in the base rate are not enough for some buyers.

"A key issue for first-time buyers eager to take their first step onto the property market in this climate will be the willingness of lenders to provide finance on attractive terms," noted Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors (Rics).

"The slippage in money market rates since the start of the new year suggests that there is more chance of further interest rate cuts being passed on more fully to borrowers but just as important will be the willingness of lenders to maintain loan to value ratios."

The Bank of England cut the base rate by a quarter of one per cent last month and has been tipped to do the same this week. However, inflation remains a concern and could prompt members of the bank's monetary policy committee to opt for a hold.


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