Press Article
METRO - 18 February, 2011
First Time Buyers
By Jo Eccles
First time buyers are often described as the ‘lifeblood’ of the UK property market, but in recent years, it has become harder and harder for them to take their first steps onto the property ladder. A recent report by the House Builders Federation (HBF) stated that the average age of a first time buyer in the UK who has had no financial assistance from ‘the bank of mum and dad’, is 38.
Housing minister, Grant Shapps, recently held a ‘summit’ to try to overcome the obstacles facing first time buyers and called upon members of the house building, mortgage and insurance industries to establish new, sustainable, ways to help first time buyers onto the ladder, and restore the property market’s lifeblood. An example of an innovative new scheme is the Lloyds TSB ‘Lend a Hand’ mortgage, where first time buyers only need a 5% deposit if someone else, usually a parent, puts money into a savings account to act as security on the mortgage.
Many in the industry view lending as the cause of first time buyer’s problems – the Council of Mortgage Lenders (CML) reported that in January, the average deposit needed to buy a first home was 23% (approx £31,500) whereas just three years ago, the average deposit was 11% (approx £13,900). So, whilst finance for first time buyers remains tight, it’s encouraging to see from these new initiatives that banks are at least starting to lend again to good applicants.
In order to return to a healthy and sustainable property market which is accessible to first time buyers, we would either need to see a significant change in affordability (i.e. salaries would need to be increased in line with inflation), or for the prices of homes to drop – in an ideal world we would have both happening in a gradual manner but things are rarely that smooth! We now need full faith in our central bankers and politicians to engineer such a smooth transition.