Hope in sight for first-time buyers

13 February 2008 / by Joy Tibbs
With house prices still relatively high, energy costs soaring and loan companies tightening their lending criteria in the UK, many people are being forced to rent rather than buy their home. However, there are indications that house prices will continue to fall, making it easier for those struggling to get on the property ladder.

Halifax research shows that the number of owner-occupiers in England fell for the second year in a row, and by a record 83,000, in 2007 to just 14.5 million. Meanwhile, the number of households renting privately rose 107,000 to just under 2.6 million. And, although the number of people in England owning their own home outright rose 1.3%, or 81,000, this was offset by a two per cent, or 164,000, decline in the number of people buying homes with a mortgage.

Chief economist at Halifax, Martin Ellis, said: "The fall in the total number of owner-occupied households in England in 2007 largely reflects the increasing affordability difficulties faced by many potential purchasers as a result of the rapid rise in house prices in recent years."

Between 2005 and 2006, the number of owner-occupiers aged 43 and under dropped 235,000, while the number of owner-occupiers in the south of England fell 92,000 (-1.2%). During the five-year period, London saw the most significant drop, with the number of owner-occupiers down 111,000 (6.3%).

"The figures for owner-occupancy clearly demonstrate that these affordability issues are most pronounced amongst younger people and in southern parts of England," said Mr Ellis.

Figures from the Council of Mortgage Lenders (CML) also pinpoint the worsening plight for first time buyer mortgage holders in 2007. While in December 2006 it records that first-time buyers spent 17.9% of their wages on mortgage interest, this rose to 20.7% in December 2007. Furthermore, 10% fewer first-time buyer mortgages were for properties below the £125,000 stamp duty threshold in 2007.

However, director general, Michael Coogan, remained optimistic. “For first-time buyers, the combination of subdued house price inflation and lower mortgage rates means affordability should ease slowly as the year progresses,” he said.

A survey from the Royal Institution of Chartered Surveyors (RICS) also suggests prices are continuing their downward trend. It reports that 54.7 percent more chartered surveyors reported a fall than a rise in house prices, an increase from 49.1 percent in December.

RICS spokesman, Jeremy Leaf, said: “A lack of demand and confidence in the housing market is clearly behind the recent price slowdown. Tightening mortgage lending criteria is a block to many who are keen to take the housing market plunge.

“However, if mortgage lenders filter the recent interest rate cuts into the market, demand should begin to increase.”

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