First time buyers are offering a glimmer of hope for the struggling mortgage market as falling house prices make the market more accessible and they take out family loans to put up hefty deposits.
House prices fell 2.2 per cent in October, according to the Halifax House Price Index, and have fallen 13.7 per cent year-on-year, making the property ladder more than just a pipe dream for first time buyers.
"Housing market conditions remain challenging in the face of the significant pressures on householders' incomes and the reduction in the availability of mortgage finance since last summer." commented Martin Ellis, chief economist at Halifax. "But housing affordability is improving significantly."
To combat the tighter mortgage
lending conditions and the requirement of bigger deposits, first time buyers are hitting their families for a loan, borrowing from parents and grandparents, the Council of Mortgage Lenders has found, which grants them access to more competitive rates.
Last year, the CML estimated that 38 per cent of buyers under the age of 30 had assistance from relatives to buy their first home; it now approximates that this has grown to almost half of first time buyers applying for 'assisted' mortgages.
But this will not be an option for all hopeful homebuyers, as their parents might also be suffering the effects of the credit crunch.
"In an environment of falling house prices and an increasingly negative economic backdrop, we could see less parental help for first-time buyers from the 'bank of mum and dad.'" the CML study said.
"Parents seeing falls in the value of their own home – and the equity they hold in it – may be less willing or able to help their children with a deposit."
Compared to 2007 when the average first time buyer mortgage
was for 90 per cent of the property's value, the average for 2008 is 84 per cent, the CML
said, with those buying their first home putting down deposits averaging £19,000 instead of £14,500 a year earlier, which most would be unable to do without assistance.
However, the CML added that the higher deposit average is more due to lenders tightening their criteria than first time buyers finding bigger deposits; 100 per cent mortgages have practically become a thing of the past, along with 125 per cent deals, leaving potential homebuyers little choice than to find a deposit or delay purchasing a house.
In spite of the fact that average house prices have fallen almost 14 per cent in the last year, first time buyers now need to find an additional £4,000 for a deposit than they did in 2007.
If more first time buyers are able to purchase homes, it continued, this will not only mean they can realise their own home-buying aspirations, but they will also help to "oil the wheels of the housing market" by enabling others to move house.
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