First-time buyer mortgages

01-Feb-2008

First-time buyers can currently take advantage of lower prices and the possibility of another interest rate cut by the Bank of England. Last month saw the share of the market occupied by first-time buyers grow signalling a healthy increase in demand.

Research published by the National Association of Estate Agents (NAEA) has shown that first-time buyers now represent 13 per cent of the market as opposed to the previous month's figure of 10.1 per cent.

NAEA president Stewart Lilly has welcomed the news calling it "encouraging" and it could certainly be a good sign for potential first-time buyers who are looking for a time when they can buy a property confidently.

Mortgage payments are generally becoming more affordable, but the ongoing complications of the credit crunch are causing some first-time buyers to struggle finding their way on to the property ladder.

Many mortgage lenders are now asking for much higher initial payments with a recent report by the Royal Institution of Chartered Surveyors (Rics) saying that first-time buyers need to save around 76.8 per cent of joint take-home pay to afford a deposit.

However, Rics has also noted that many homeowners have found that the burden of repayments eased a little in the final quarter of 2007 largely due to stable interest rates and a steady rise in income.

Yorkshire Building Society has just announced that it is cutting the cost of its two- year fixed rate mortgages and has introduced a £250,000 maximum, and intends to implement further reductions on its mortgage range that it will announce next week.

It has also been reported recently that second home ownership is having something of a knock-on effect,t resulting in first-time buyers missing out. Recent research by YouGov on behalf of Direct Line Home Insurance has revealed that second home ownership is predicted to rise to 24 per cent by 2015, so buyers may want to take this into consideration.

One of the major factors causing this problem is the fact that there is currently a shortage of supply but with incredible demand at the same time, so an increase in second home buyers is somewhat limiting to first-time buyers or those on low to moderate incomes.

The Council of Mortgage Lenders (CML) has predicted that mortgage lending will be more "subdued" in 2008, since figures for December 2007 have recorded the lowest levels since 1995.

This may be good news for the first-time buyer, however, according to the group, which says: "Softer prices and improved prospects of finding a bargain might help to put a floor under the interest of those looking to enter the market".

In fact, the CML has noted that the general air of "woe" about the housing market may be "overstated". It has made reference to "glimmers of light" involving the level of buyer inquiries gaining some momentum which could well signal that the market is about to stabilise in the coming months.

The group went on to say that should interest rates fall, they will then "price into the market" which could improve prospects for the year, especially for fixed-rate borrowers.

Commenting on this, the CML said: "Bank rate may only have come down by 0.25 per cent so far, but the move in the longer term rates against which fixed-rate mortgage products are priced has been much greater - by about 1.2 per cent since the middle of last year."

So first-time buyers should feel confident about the market as a whole and not be discouraged by the gloomy outlook from some quarters.

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