ROOF Blog

Research from the Intermediary Mortgage Lenders Association (IMLA) has found that brokers expect to handle an increase in the level of activity for first-time buyers. It is the first time in 18 months that IMLA has forecast positive growth for the industry. Director of IMLA Peter Williams said that while the increase is small at less than 1 per cent and more mortgage availability was required, it was an ‘important signal’ of a return to confidence.

Public confidence in the housing market is higher than at any point since September 2007 and the Northern Rock bail-out, a survey from propertyfinder.com found. Around 60 per cent of respondents thought house prices would rise by May 2010, while 32.5 per cent thought prices would fall and a further 8.5 per cent said that prices would be unchanged in 12 months’ time. However, 0.7 per cent of first-time buyers expected prices to grow in the next 12 months, and only 9 per cent though mortgage are affordable. 

The National Association of Estate Agents has accused the government of doing too little to help first-time buyers into the market and undermining the chance of a housing recovery. Research by propertylive.co.uk found that while the cost of mortgage finance has fallen to a record low, lenders are asking for such large deposits that the first rung of the property ladder remains out of reach. Nearly seven out of ten first-time buyers have given up hope of ever owning their own home. Of those who expect to buy a home, only 15 per cent think it will be in the next two years, and 5 per cent think it will be at least five years before they can afford it.

The National Housing Federation says banks are turning away £1 billion of business because of prejudice against low cost housing. The banks are refusing to lend to people on modest incomes – first-time buyers and key workers – because they mistakenly view the shared ownership deals as unsound. The NHF estimates that the banks lack of interest in 2008/09 resulted in 9,000 low cost homes remaining unsold, and has called for the state owned banks to make lending on shared ownership schemes a priority.

Lloyds is offering a new deal for first-time buyers that allows parents or friends to use their savings as a guarantee against a default. The bank is offering to lend up to 95 per cent of a property’s value for a three-year fixed rate as long as savings worth 20 per cent of the property are deposited into a Lloyds account, which can be used if the borrower defaults.

Council of Mortgage Lenders (CML) research shows a sharp rise in the number of mortgages in March. Around 31,000 mortgages were granted, up 29 per cent n February, although down 33 per cent compared with year on year figures. CML said that the cost of paying interest on home loans was at its lowest level since 2004, encouraging some 12,500 first-time buyers to take out a mortgage in March – or 40 per cent of all loans – the highest number since April 2005.  Low interest rates and house prices means that interest repayments equal 15.1 per cent of first timers’ income.

First-time buyers using the government MyChoice HomeBuy scheme to purchase a house are having to pull out at the last minute as the scheme has run out of money. The government said the shortage of cash was a result of the huge demand for it, but experts argue that it has left thousands of buyers without funds to complete their purchases. The HomeBuy scheme allowed applicants to buy any property on the market, not just new builds, by offering an equity loan for 15 to 50 per cent of the property with the balance coming from a traditional mortgage.

Most first-time buyers think it is now a good time to buy a home. Around 57 per cent of people hoping to get on the house ladder thought house prices would either stay the same or increase in the coming 12 months and one in five first-time buyers said they thought it would be more difficult to buy in a year’s time, while 69 per cent said they believed now was a good time to buy, according to Rightmove. Six out of 10 people hoping to buy their first property are currently renting privately, with 30 per cent living with their parents and 6 per cent in council or local authority accommodation. The average buyer questioned had more than £30,000 saved for a deposit, the equivalent of around 20 per cent of the average price.

Housing for first-time buyers is at its most affordable for more than six years, according to a survey. The Halifax affordability review found that house price to average earnings ratio has declined more than 25 per cent from its peak of 5.84 in July 2007 to 4.34 in March this year. The proportion of disposable earnings spent on mortgage payments has also fallen significantly, from a peak of 48 per cent in 2007 to 31 per cent in the first quarter of 2009, while the proportion of local authorities where housing is affordable for a first-time buyers has more than trebled since 2007 – up to 21 per cent from 6 per cent in the third quarter 2007.

For first-time buyers and remortgagers just getting a mortgage remains difficult, however. The moneyextra.com mortgage index showed that lending to first-time buyers with deposits of less than 5 per cent was non-existent while the supply of borrowing for those with 10 per cent cash to put down has decreased by 84 per cent compared to the same time last year. For first-time buyers the average loan to value was 71 per cent, compared with 82 per cent last year, while for people looking to re-mortgage the average loan to value ratio was 69 per cent compared to 82 per cent last year.