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Finally Some Good News on Mortgages for First Time Buyers?

Although stepping onto the property ladder for the first time has never been easy, there was a time when it was within the reach of a typical couple who both were earning a reasonable salary.

This quite clearly is no longer the case. Recently published figures reveal that in the ten years prior to February 2011 house prices in the United Kingdom rose by an average of 91%. In the North of England that figure was actually 102%, whilst in the South of England it was a still not inconsiderable 75%.

The average price of a house in the South is now £206,091, whilst in the North it is £132,163.

When the continuing increase in house prices first threatened to price all but the wealthiest first time buyers out of the market the response from lenders was to make finance easier to obtain. Thus where lenders had previously been prepared to agree a mortgage package at around three times the annual salary of the purchaser, suddenly potential buyers were being offered four, five or even six times their salary, sometimes without even a deposit being asked for.

Indeed mortgages of up to eight times the buyer’s salary were being offered in places.

However, with the arrival of the credit crunch a more cautious approach from lenders was considered necessary, and now first time buyers face the twin hurdles of high house prices and the unwillingness of banks to lend beyond certain strict guidelines. To buy what is still a modest home in the south for £200k without a deposit a couple would now need to be earning in the region of £70k between them. Failing this a substantial deposit would need to be forthcoming in order to provide security for the lender in the event of default.

The market is such of course that it cannot afford to price out its own client base, so inevitably lenders are now looking at ways in which mortgages for first time buyers can be offered once again without seeking a deposit that is prohibitive. There are encouraging signs that this is happening, and although most couples would still not be able to move onto the property ladder it is a welcome move in the right direction.

Obviously the spectre of negative equity, and the memory of how so many buyers lost their homes not so very long ago, lingers like the proverbial Sword of Damocles hanging over the heads of those who right now may just about be able to climb aboard. Those whose preference is for a fixed-rate arrangement should be satisfied that their occupations and standards of living are safe and unlikely to alter in the near future. Those seeking a variable arrangement need to be mindful of the potential of the market to change, and to leave them struggling to make repayments.

Although house prices have continued to rise for some considerable time, there is always of course the possibility that they will fall in the future. Those seeking to buy as an investment need to be aware of this fact too.

 
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