First Time Buyers Struggle to Find Larger Deposits
Published Thursday November 6th 2008.Despite falling house prices First-Time Buyers (FTBs) are having to find larger deposits, stumping up an average of £19,000 compared to just £14,500 a year ago, according to data from the Council of Mortgage Lenders (CML). Even though data from both Nationwide and Halifax indicate house prices have fallen an average of 15% in the last 12 months.
Credit Crunch induced tightening of lending criteria, including the lowering of loan-to-value ratios, has reduced mortgage choice by nearly three quarters. From a peak of 13,000 different products in July 2007, the number is now less than 3,300 today.
Less choice and larger deposits mean that more than ever FTBs are turning to family in order to make their house purchase possible. In 2006 just 38 percent of buyers borrowed from family to fund the deposit, recently that figure has soared to around 50 percent as FTBs find that essential deposit by turning to their own ‘lender of last resort’ . . . mum and dad.
"So even though the total needed to buy a house is declining, first-time buyers are facing a new affordability challenge in the shape of a higher deposit required by lenders", a CML spokesperson said.
Whilst the need for higher deposits exists, those wishing to take that first step on to the property ladder will continue to find it difficult. Some, particularly given the deepening recession and procession of bleak headlines, will decide not to bother. And, without the first-time buyers coming in and putting a floor under the housing market, the volume of property sales will continue to trend down dragging house prices down with it.