First-timer buyers face hurdles in property race
First-time buyers caught in 'sub prime crossfire'
Tuesday, 11 Sep 2007 15:05
First-timer buyers are borrowing at record levels to get on the property ladder and facing lenders tightening up on who they will provide mortgages to.
New data from the Council of Mortgage Lenders (CML) reveal affordability issues are continuing to bite as the average first-time buyer is having to borrow 3.39 times their income to get on the property ladder.
Mortgage interest now takes on average 19.7 per cent of a first-timer's income.
The total number of mortgages issued to first-timers fell by seven per cent in July, according to the new CML figures.
Across the whole market there were 94,000 loans for house purchases in July and 92,000 remortgages - totalling £14.8 billion and £11.5 billion respectively.
With concerns over rising interest rates, fixed rate deals accounted for 79 per cent of all mortgages and remortgages.
First-timers are also facing further difficulties buying as banks and building societies are tightening up their lending criteria.
Instabilities stemming from the sub-prime market mean lenders are keeping a keener eye on who they are lending to.
Paul Holmes, operations director at mortgage introducer Firstrung, said: "Our brokers used to be alerted of new first-time buyer mortgage products and positive changes on a daily basis.
"Since the sub-prime 'fall out' in the US the only news has been detrimental in terms of first-time buyer mortgage opportunities. We are already beginning to witness a revision of the 100% and 100%+ criteria and first-time buyers with less than perfect credit histories have seen their rates increase by up to 1.5 per cent."
He added several mortgage offers have now been withdrawn by lenders.
Mr Holmes went on to explain while first-time buyers were finding borrowing harder, buy-to-let investors were probably the greatest risk for lenders.
"First-time buyers are not speculators and moreover are not reckless borrowers, they simply want to purchase their first home. The average first time buyer loan is 135K with a purchase price of 150K," he said.
"This hardly compares to lenders exposure in the buy-to-let industry where an average landlord can have multiple loans with questionable equity, particularly if they indulged in the new build market where many units lie empty despite having loans attached."