First time buyer market heading for paralysis

| November 18, 2011 | 0 Comments
First time buyer market heading for paralysis

Mortgage lending fell by 4 per cent to £13.1 billion last month, compared with £13.7 billion in September when it was at its highest level for two years.

Lending was up by 13% year-on-year in October 2011, from £11.6 billion in October 2010.

However, the figures include a strong year-on-year increase in remortgage activity rather than new mortgages and house sales are still 50 per cent down on pre-recession levels.

Speaking to the BBC about the new figures, Richard Sexton of chartered surveyors e.surv commented: “Unless the economy gets moving, and the crisis wreaking havoc in the eurozone dissipates, there is a very real chance the first time buyer market will enter a state of near paralysis.”

In 2007, 13 per cent of loans were made to borrowers with a deposit of 10% or less, compared with a current level of just one per cent.

A number of factors are contributing to stagnation in the housing market including a shortage of new properties being offered for sale.

The high cost of living, rising unemployment and wage freezes means that many prospective buyers are unable to afford the large deposits demanded by mortgage lenders and are therefore turning to the rental market.

A study by Santander Mortgages revealed that first time buyers are being forced to take on second jobs and personal loans in order to afford a deposit on a house.

Some are sharing payments with friends in order to take their first step on the property ladder.

Average housing deposits are now £37,3752, representing 17% of the overall property value.

However it’s not just first-time buyers who are struggling to raise a deposit, as the average deposit needed for a rental home in now more than £1,000.

According to mydeposits the average rental deposit has increased by £125 in the last year to £1110.

Tags: first-time buyer market, housing deposits, , , rental deposit

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