The average house price may have fallen by more than six per cent since June last year, but this has done little to help first time buyers, for many of whom home ownership is virtually impossible.
According to the Royal Institute of Chartered Surveyors (RICS), home affordability has worsened further this quarter, with prospective home buyers having to save more than 100 per cent of their annual combined take home pay to get together a deposit and the other costs associated with buying their first home.
RICS data shows that the upfront costs of buying a home have increased by 100.8 per cent, up from 99.2 per cent in quarter one and 91.9% a year ago, which means affordability is only slightly below the all time high of 109.6 per cent in quarter three of 2004.
RICS has found that one of the main reasons for the worsening accessibility is the reductions in LTV offered to first time buyers by mortgage lenders
By pulling deals, including those with LTVs of 90 per cent or more, lenders are forcing first time buyers to come up with bigger deposits.
This, combined with the 'continued burden' of stamp duty and other costs associated with buying a home, including solicitors fees, means the dream of home ownership is all but over for many couples.
According to figures from the The Times
, in a couple where both are earning the average wage, their combined take home pay is £44,000. In order to afford the average first time buyer home of £162,666, they would have to put aside 66 per cent of their annual pay, a significant increase in the last 10 years – in 1997, the proportion would have been 20 per cent. And, according to David Stubbs, senior economist at RICS, the situation could worsen still.
"The picture does not look like improving in the latter part of 2008," he said, "and first time buyers will find their path to home ownership increasingly blocked."
And it is not just first time buyers that are struggling – home owners coming to the end of their mortgage deals are facing some of the highest fixed rates for years, with the interest on two year fixed deals rising to their highest level for more than eight years.
Banks and building societies have also increased the fees for setting up mortgage deals; according to The Times, five years ago, the average arrangement fee was around £350, now, fees of upwards of £2,000 are not unusual.
In this increasingly tough market, shopping around for a mortgage deal and getting the right advice is even ore important, which is where Fairinvestment.co.uk's no obligation mortgage
service can help.
© Fair Investment