First time buyers now have to come up with a mortgage deposit of 13 per cent of the property value which equates to £21,055 – more than the average salary.
The average house price for first time buyers is £162,000, with mortgage
lenders typically asking for 13 per cent as a deposit; the average age of a person taking their first step onto the property ladder is 28, and the average salary for a 28 year old is £20,113 a year.
From today, Halifax – the UK's biggest mortgage lender – will refuse home loans to people who need to borrow more than 60 per cent of the property's value, so, unless first time buyers have generous parents, it is unlikely the property ladder will even be in sight for them, and getting a foot on it will seem like an impossibility.
Even though interest rates have fallen three times since last December and have not been raised since July 2007, lenders are still making it difficult to get a mortgage, especially a first time buyer mortgage
, and are offering their best rates to buyers who have at least a 25 per cent deposit.
While the number of mortgages taken out in April was up four per cent compared to the previous month, it was down 36 per cent on the figures from April 2007. Many would-be first time buyers are opting to rent instead of buy because they cannot afford the deposit since the 100 per cent mortgage
became a rarity earlier this year, and mortgage rates continue to rise.
Keith McNeilly, co-founder of Moveme.com, said: "While people are still moving, the increase in the number of people choosing to move between rented accommodation is a reflection of consumers' lack of confidence in the property market and current affordability constraints."
During the housing boom of the last decade when house prices rise 224 per cent, people saw property as an investment
, sometimes replacing savings and pensions as preparation for retirement. Buy-to-let landlords invested £1.5billion into property during the last 10 years alone.
This has all changed now, with industry analysts predicting falls in prices of as much as 10 per cent by the end of the year, which is affecting not only investors and homeowners but also home builders, construction companies, plumbers, builders, and electricians.
Mr McNeilly added: "Potential first time buyers who previously would have been the largest group moving from renting to buying, are now delaying a purchase as an uncertain market and tougher lending criteria is making it harder for this group to step onto the property ladder – a trend that is likely to continue for the rest of 2008."
© Fair Investment