house buyers – Tough Times For First Time House Buyers In The UK

The tough times for first time buyers in the UK housing market look set to continue. The subprime mortgage crisis in the US has caused banks financial hardships, and with the global reach of many High Street names it was surely only a matter of time before the financial uncertainty in the US spread to the UK.

Average house prices in the UK have now risen to around GBP160,000. This means a couple buying their first home would need a deposit of at least GBP8,000 and a combined yearly income of GBP50,000. Of course, this assumes that they can still get a mortgage with a relatively high loan to value (LTV) rate of 95%.

Despite recent cuts to the base interest rate by the Bank of England, many mortgage providers are failing to pass these cuts on to consumers. In a move born from greed, mortgage providers are keen to protect their profit margins at the expense of first time buyers, looking to get a foot on the property ladder.

Equally, with so many established home owners able to use the equity from record breaking house price rises in the last few years, it is becoming more and more difficult for first time buyers to find competitive mortgages. The high LTV first time buyers require also weighs heavily against them when compared against the equity heavy home owners who are moving properties.

In the face of the deepening subprime crisis, and facing significant profit cuts or even losses, mortgage lenders are now tightening their lending criteria. The fear is that the 95% LTV mortgages days are numbered, as lenders push for larger deposits and smaller LTVs. On top of this lenders are weighting interest rates to discourage borrowers from taking up high LTV mortgages, forcing buyers to come up with much higher deposits.

The increasing cost of University education is also taking it’s toll. With UK students leaving University with an average of GBP13,000 of debt, it is taking longer for buyers to save up their deposits. Student loans are no longer the sole source of debt for students, with reckless lending by banks and a number of credit cards aimed at students all increasing the burden of debt for many young people.

Juggling their existing debts while struggling to qualify for lenders’ increasingly harsh mortgage qualification criteria is making mortgages for first time buyers tougher than ever. With a gloomy financial outlook, both for the UK and globally, this trend looks set to continue for some time.

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house buyers – First-time house buyers still finding it tough to get into the
market

Buying a house in the current housing market is tough. Becoming
a first-time house buyer is very tough. Recent research by the
Chartered Institute of Housing
Cymru (CIH) has show just how difficult it has become for
people in Wales aged 20-39 to get a foothold on the housing
ladder, as the gap between house prices and wages increases.

The study showed that young working households in Wales
currently earn on average £27,039, however the cost of a two
bedroom house is almost four times that at £107,864. In some
rural areas the situation is even worse, with house prices
around five times the average household income. The most
expensive areas according to the survey were Monmouthshire
(£147,084), Cardiff (£142,773) and the Vale of Glamorgan
(£138,019).

A representative of the CIH said “Young households are being
forced out of the property market across the country … It is
particularly bad in areas where wages and salaries are low yet
demand for homes is high.”

However the news is not all bad for first-time buyers in Wales,
as the Royal Bank of Scotland has announced that the Rhondda
town of Ferndale has been crowned the most desirable investment
spot for new home buyers in the its first-time buyer property
index.

A spokesperson from The Royal Bank of Scotland said, “The index
reveals that for savvy house hunters, the most crucial aspects
determining future return on investment are the low house price
to high income ratio and the recent house price growth rate of
the area, alongside any regeneration prospects.”

Ferndale topped the chart despite earlier this year gaining the
dubious distinction of coming bottom in a house price league of
1,414 Welsh and English towns based on prices since 2000.

In the wake of the recent market upturn in the town, it is now
boasting a large number of “for sale” and “sold” signs and
looking to attract more first-time buyers.

According to The Royal Bank of Scotland, “Buying in an
up-and-coming property hotspot can help first-time buyers climb
the ladder faster to their ideal property or location in the
future”.

Housing organization Rightmove believe that with property
prices in Wales bucking the current UK decline in house prices
and outstripping the rest of Britain by more 7% and correcting a
previous 6% price slump, the housing market in Wales is starting
to look brighter for sellers.

Rightmove also declared last month that almost 120,000 sellers
in England and Wales cut their asking price in the four weeks up
to 6th August and stated that this reflected that it is
currently a buyers’ market as, “There is too much unsold
property still available to expect anything other than a
continuation of static asking prices this year.”

Rightmove said that with house prices doubling over the last
five or six years and mortgage rates having also recently risen,
the only affordable option for some people is to rent property
rather than buying.

Isabelle Kassam writing for Moneynet believes that
since, “Interest rates fell recently but mortgage lenders have
been slow to pass the reduction on to consumers. Borrowers who
are holding out for an even lower fixed rate are playing an
anxious waiting game.”

The situation does not look good for those who are presently in
rented accommodation hoping for the climate in the housing
market to get better, as the Royal Institution for Chartered
Surveyors (RICS) has revealed that rents have risen at their
fastest rate for four years. This is rubbing salt into the
wounds of would-be first-time buyers, as tenant demand is rising
on flats as prospective first-time buyers struggle to afford
their first property. A vicious circle has been created that is
affecting many prospective buyers. While not being able to
currently afford to buy, the higher rents are preventing the
hopeful first-time buyers from saving enough to get out of the
rented accommodation trap.

Mr Shipside of Rightmove indicated that those being hurt most,
“really is first-time buyers, and there is a lot of demand for
flats. Two thirds of tenants are actually under 35, so they are
the people that are being hurt by rising house prices and rising
mortgage rates.”

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