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Obstacles mount for first-time buyers

18 October 2007
Reports indicate that first-time buyers are now faced with fewer mortgage deals to choose from, higher stamp duty and a greater risk of lenders cancelling deals at the last minute.

MoneyFacts has revealed mortgage companies are taking a more cautious approach to lending and have slashed the number of home loans by 41 per cent in just three months.

This could be particularly worrying for first-time buyers, who will now have fewer mortgage deals to choose between – the number withdrawn is said to be more than 6,000 – and will also face more stringent credit checks. Those with any negative credit history will be the worst affected, as MoneyFacts claims 72 per cent of ‘impaired credit' home-buyer loans have been withdrawn.

The next hurdle is stamp duty. While laws on inheritance tax have seen the threshold on property prices doubled to £600,000, the price bands for stamp duty have remained the same.

Mortgage company Mform claims the average stamp duty charge was £3,581 in 2006-07 compared with £2,871 in 2005-06, a rise of nearly 25 per cent. Therefore, first-time buyers not only struggle to find a deal and raise the finance, they are now forced to pay more tax on their chosen property.

And, as if that is not enough, buyers are also facing difficulties towards the end of the house buying process. Linked to the current ‘credit crunch’ environment, some mortgage applications that had previously been accepted are now being queried as a result of stricter lending rules.

According to Convex Conveyancing, around 6,500 buyers currently buying homes could be affected and offers could even be withdrawn in the final stages of the buying process.

Perhaps this partly explains why the number of first-time buyers has fallen 20 per cent since March, according to

“First-time buyers are the lifeblood of the housing market and provide essential liquidity, so the fact this segment is getting smaller is worrying for the economy as a whole,” said the company’s head of mortgages, Louise Cuming.

Find out more about the best mortgages for first-time buyers and stamp duty

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