First time buyers pay record deposits

First time buyers pay record deposits

First time buyers are paying record deposits as lenders make it even more difficult to take out a mortgage.

Figures from the Council of Mortgage Lenders (CML) show that a typical first time buyer now has to put down a deposit of 24% – the highest percentage since records began in 1974.

With the average house price at £160,429, first time buyers are having to find £38,478 to get on the mortgage ladder.

As mortgage lenders tighten their criteria for lending, the number of new owner mortgages granted in January dropped to 8,900, less than half the 18,000 first time mortgages approved in January 2008.

CML said it expects things to improve soon as government measures to encourage lending filter through to potential homeowners.

“People want to know why lenders are not lending,” said Michael Coogan, CML director-general.

“They are [lending], but government schemes to restore the flow of funds are primarily focused on a few large banks and recent lending commitments by a few lenders cannot fill the gap overnight, although we hope to see more funds flowing into mortgage activity later in the year.

“Mortgage affordability is good for those borrowers with deposits, but consumer confidence and lender appetite will remain muted in the face of rising unemployment and falling house prices.”

City economists, however, reject Coogan’s analysis and see things getting worse before they get better.

Michael Saunders of Citi European Economics said: “Affordability is getting much worse, not better, for first-time buyers.

“Unless loan-to-value ratios improve significantly, house prices are likely to have to fall considerably further before affordability improves enough to allow first-time buyers to return in significant numbers”

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