The Royal Institution of Chartered Surveyors (RICS) reports that 38% of prospective homebuyers in the United Kingdom (UK) fail to secure financing to transition out of rental living because they can’t afford to enter the housing market while simultaneously paying for rent. Larger down payments combined with increased rents and stiffer lending requirements are a force that cannot be overcome by a growing number of the UK’s hopeful homeowners. RICS is advocating a mortgage indemnity plan that serves more than the new-build market. For more on this continue reading the following article from Property Wire.
Over a third of potential buyers in the UK are trapped in rented accommodation as they cannot afford to access the property market, according to the Royal Institution of Chartered Surveyors (RICS).
Many are seeing their purchases fall through due to difficulties with mortgage finance and 38% of potential first time buyers are forced to continue renting as they simply cannot afford to get a foot on the property ladder.
Its survey of chartered surveyors across the UK also found that almost 20% of those who do try and take the plunge are seeing their dreams of home ownership shattered as problems accessing adequate mortgage finance are causing their deals to fall through.
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The large deposits required by many lenders coupled with steadily increasing rents across much of the country mean that those who cannot rely on the bank of mum and dad to raise a deposit are struggling to generate the funds that many banks require.
The government recently introduced its NewBuy scheme which is designed to assist first time buyers by encouraging lenders to offer 95% mortgages. However, as this is only available for newly built properties, the vast majority of homes in the UK remain unaffordable and inaccessible for many says RICS.
RICS is asking the government to consider a similar scheme for second hand properties, lending or guaranteeing first time buyers a reasonable deposit in return for a stake in the home.
It says this would provide the government and the taxpayer with a clear return on investment, allow first time buyers to access the market and free up stagnant chains. Whilst there are a number of schemes being considered by local authorities and private funders, this is fragmented at present and lacks the volume to significantly improve the number of buyers needed to stimulate market activity.
.Many first time buyers are facing the prospect of a property ladder with no rungs. With lenders requiring such hefty deposits and affordable mortgage deals out of reach for most, a generation of potential homeowners are facing an uphill struggle. Without allowing more first time buyers to enter the market, chains will continue to stall and transaction levels will stagnate,’ said Peter Bolton King, RICS global residential director.
‘RICS would like the government to consider a mortgage indemnity scheme that works for the whole market, not just new build. NewBuy could potentially lead to market distortion by reducing demand for second hand property. Without allowing first time buyers greater access to the second hand market, chains and transaction levels will continue to stagnate,’ he added.
This article was republished with permission from Property Wire.