A new survey conducted by MoneySupermarket.com shows that 40% of prospective homebuyers in the United Kingdom (UK) are essentially abandoning the homeownership market due to rising costs and ever-increasing restrictions on lending. Although there are 20% more mortgages available over last year that only require a 10% down payment, it is still not enough to satisfy the market. Many would-be buyers are renting longer so that they may save up a deposit, and critics note the only good news about the situation is that the flat housing market means that prices will likely remain neutral while these young purchasers scrimp for a piece of the UK dream. For more on this continue reading the following article from Property Wire.
Millions of people in the UK don’t intend to buy a property and the average age of those who do is likely to be 37 by the time they are financially able to buy their fist home, new research shows.
With UK market conditions continuing to make it difficult for would be home owners to get a foot on the property ladder, some 40% plan to rent until they can afford to buy, the research from MoneySupermarket.com shows.
It comes at a time when the number of mortgage products available for first time buyers has dropped by 12% in a year. The firm said that the number of products currently stands at just 1,337, a drop of 187 products since this time last year. Prior to the credit crunch there were 14,940 available in July 2007.
The average loan to value (LTV) for products available to new buyers is 78% which means someone taking out a mortgage on a £150,000 property for example would need a deposit of £33,000, well beyond the means of most first time buyers.
However, there is still good news for those taking the property plunge as the number of mortgages available for those with only a 10% deposit is currently 209, up 20% on 2011, and the average interest rate for these mortgages has dropped by 1.14% since April 2009.
‘Home ownership is a really big thing here in the UK. For years it has been something millions of people aspire to and therefore it's surprising to see that this may be changing and that some people are giving up on the hope of ever owning their own home,’ said Clare Francis, mortgage spokesperson at Moneysupermarket.
‘To a certain degree it is perhaps understandable. Despite a stagnant housing market in many areas of the country, property prices remain exceptionally high. Coupled with this, mortgages remain hard to come by with the number of loans available to those with a small deposit well down on the pre credit crunch days. Rising living costs are also making it harder for aspiring first time buyers to save that all important deposit,’ she added.
When those with an idea on when they would buy were asked how they planned to pay for the deposit on their new home, 40% say they will rent until they have saved enough. Just 9% of would be homeowners have already saved for a deposit, yet a hopeful 6% say they will play the lottery for a home deposit over asking their family and friends. Some 6% are hoping that house prices will drop further, lessening the amount they need to save.
The research also asked what people had been forced to put on hold in their life due to the economic climate, and found that when it comes to property some 17% of 18 to 34 year olds have put off buying a house and delayed this by four years on average.
‘Many are taking the decision to rent for longer while they save a large enough deposit to buy their first home. While we have seen an increase in the number of mortgages available up to 90 per cent of the property's value, the rates on these deals are still higher than if you can scrape a larger deposit together,’ said Francis.
‘On the plus side the flat housing market means aspiring home owners can take their time to build up a deposit as they don't have to worry that prices will become unaffordable if they don't buy now,’ she added.
This article was republished with permission from Property Wire.