Deposits not payments the issue for buyers

05-Dec-2007

First time buyer schemes which focus on reducing monthly mortgage repayments are failing to realise that it is the deposit causing the most problems, according to the Building Societies Association (BSA).

The association has found that most of its members believe that raising a deposit is the main problem facing new buyers, adding that the switch from renting to buying will not necessarily bring with it higher monthly costs.

The BSA noted the popularity of 100 per cent mortgage schemes but said that the likes of shared equity schemes are perhaps missing the point.

"With societies being anxious to help people onto the housing ladder, it is no surprise that many make 100 per cent loans available to buyers who can afford the repayments on such a mortgage, allowing them to circumvent the need for a deposit," said BSA director general Adrian Coles.

"But […] our research has demonstrated the wide range of mortgages that societies provide to first time buyers, reflecting both the diversity of the building society sector and their enthusiasm for responsibly helping first time buyers.

"The existing government schemes designed to help aspirant first time buyers fail to recognise that it is the deposit that is the problem rather than the monthly mortgage repayment. With rents being so high in many areas, buyers find that their monthly housing costs are often no higher than their previous monthly rental payments," Mr Coles continued.

The study comes a week after the Yorkshire Building Society revealed that it was increasing the total amount of equity on offer to buyers via the government's HomeBuy scheme to a total of 32.5 per cent.

Bigger deposits leading to higher charges.


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