With property prices beginning to show a steady fall month after month it appears that the time is right for first time buyers to leap back into the property ladder. As a bonus, with low interest rates available at this time for most first time buyers it will be cheaper to simply acquire a mortgage versus paying rent on a property of the same value.
About a third of all properties available on the market are discounted by six percent and the prices are expected to continue to fall by almost four percent before the close of 2010 according to predictions from Jones Lang LaSalle the property services global firm.
Therefore, the market is almost crying out to new buyers given the fact that they are exempt from stamp duty for the time being on all homes under £250,000 and the deals are already out there without negotiations. Plus, vendors are going to compete for any new buyer’s business given the fact that they have nothing to sell off before a transition can be made.
With all this in mind, it seems curious that first time buyers are not biting at the bit, but there is a perfectly logical reason for this: the deposit. The Council of Mortgage Lenders estimates that a first time buyer on average will need to have a 24% deposit in order to secure a mortgage which comes out to average about £34,000 which of course most buyers do not have on their own.
This had led many people to turn to their parents to act as guarantors so that the bank will approve a mortgage. If this is not an option, then the choice is either pay a higher interest rate or start saving because the best deals are still available only to those who can meet the deposit.
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Until lending criteria is relaxed I can not see that house prices will rise too much in the future. The Banks simply do not have the money to lend to high risk customers with only a small deposit.