Coreco were quoted in an excellent Sunday Times article this week about The Sunday Times’s new research showing that the average age of a First Time Buyer is now 31.

With the Royal Institution of Chartered Surveyors, (RICS) predicting “prices could rise by “another 25% over the next five years” because of a shortage of supply. The number of properties for sale has slumped to its lowest level since Rics records began in 1978.”

This all seems very gloomy for those looking to get onto the property ladder, despite the fact that actually, from a mortgage perspective, 1st Time buyers have never had such a cheap interest rate environment. So, for those who can borrow the amounts required this can be a real saving compared to renting and affordability at current rates is not so much of an issue.

The issue of course is obtaining suitable deposits in the face of higher house prices and because of this extra deposit burden we have seen the average age of 1st Time buyers increase especially in London, with a large number now coming to us well into their 30’s or even 40’s before they feel the time is right to buy.

This has also put pressure on the Bank of Mum & Dad to help out their children and a high percentage of the first time buyers we see have some kind of cash assistance from parents or, increasingly, grandparents.

The majority of lenders are happy to accept gifted deposits as long as the giftor confirms in writing that they do not expect the money back, there is no loan payments attached to the gift and that they will not have any rights to the property at all.

This burden has become a little easier with the introduction of Government schemes such as Help To Buy which have really made their mark outside of London and the South East. The knock on effect of these schemes has also been to give other lenders more confidence to offer their own 90% or even 95% LTV loans which has helped to increase the number of products available to first time buyers.

Competitive pressures have also helped to keep the pricing of these products at competitive levels with 2 year discounted rates at 90% LTV now available from just 2.45% (4.8 APR) through Hinckley & Rugby Building Society.

For those borrowers who do not have the luxury of a cash gift, there are a plethora of schemes that have appeared such as Halifax’s Lend A Hand product, Woolwich’s Springboard mortgage and lenders such as the Family Building Society.

Being able to utilise family savings held on account to help obtain a mortgage rather than losing that cash for good has proved popular for many new buyers.

Although the number of options on a pure guarantor basis have diminished, there are some still around such as Buckinghamshire Building Society’s product which enables first time buyers to take out a higher mortgage, up to 100% LTV, by putting a second charge on their parents property, as long as there is enough equity available.

This gets round the whole deposit issue and crucially there is no age limit on the age of the guarantors. With all of these schemes however, it is of course very important that the guarantors themselves obtain independent advice to make sure they fully understand their obligations.

Although it does seem that lenders have been making things tough for 1st time buyers since the arrival of the Mortgage Market Review, the reality is that there are some very good products available, with more lenders looking for innovative solutions to help get people on the property ladder.

 

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