Large deposits still challenging first-time buyers
The Council of Mortgage Lenders (CML) is forecasting a positive year in 2013 for the UK property market, but first-time buyers are still struggling to find the large deposits required by mortgage lenders.
The CML has recorded a steady increase in mortgage lending with 49,500 home loans advanced for house purchases in October.
This represents a rise of 13.8% from September, a slower month than usual, and a 10.2 per cent increase compared with October 2011.
Paul Smee, the CML’s director general said: “If the incremental improvements in house purchase lending that we are currently seeing persist as we expect them to, then next year should feel a more stable and positive year in the housing and mortgage markets.”
However mortgage lenders are still asking for deposits of 20 per cent on average, making it difficult for first-time buyers to take their first step onto the property ladder.
The 20,000 first-time buyer loans advanced in October have been labelled ‘the transactions of a privileged few’ by Neil Ryner, director of property finance group Ryner and Partners.
The CML estimates that 66 per cent of first-time buyers seek financial help from relatives to buy a property.
The increase in mortgage lending follows the introduction of the government’s Funding for Lending scheme in August.
However recent research by consumer group Which? revealed that 50 per cent of people are concerned about mortgage rates increasing.
Despite Bank of England base rate being at an historic low of 0.5 per cent for over three years, 1.6 million people have experienced an increase in their Standard Variable Rate since August 2011.
Which? is calling for banks and building societies to be more transparent about mortgage lending that has taken place under the Funding for Lending Scheme.
The scheme is designed to ensure that lenders pass on cheaper finance to borrowers, but Which? wants clearer rules to be introduced to ensure more borrowers benefit, rather than just those with significant equity in their homes.