The withdrawal by lenders of the 100% mortgage, as well as the lack of cheap mortgages which were so readily available last year, means that first-time buyers need to raise a large deposit for their house purchase by other means in order to get onto the property ladder.
[UKPRwire, Fri May 02 2008] The withdrawal by lenders of the 100% mortgage, as well as the lack of cheap mortgages which were so readily available last year, means that first-time buyers need to raise a large deposit for their house purchase by other means in order to get onto the property ladder.
According to a recent survey by the online change of address service IAmMoving.com, almost a third of all first-time buyers are using borrowings, unsecured loans and credit card debt to raise the deposit they need.
This is a risky in today’s shaky and uncertain market, and even a small change in circumstances or shift in prices could leave these buyers open to the dangers of negative equity and even losing their homes, unless they are in a very secure financial position and have other assets to fall back on – which most first-time buyers do not.
Of the 250 first-time buyers questioned in the survey, 13% were raising the deposit – likely to be around £10,000 to £15,000 – through an unsecured loan or credit card debt, while 17% were borrowing from family or friends. A further 9% were either selling an expensive item, such as a car, or using an inheritance to secure a deposit, and 7% were using shared ownership.
However, many first-time buyers (42%) are going the safer route in getting onto the property ladder, which is to use their savings to pay for the deposit. This strategy, said Simon Preston, chairman of IamMoving.com, “gives an important buffer against negative equity”, whereas using unsecured loans and 100% mortgages clearly does not provide any safety net.
While the number of first-time buyers fell significantly in March – by 3.4% from February – according to the National Association of Estate Agents (NAEA), the IAmMoving.com survey showed that many were still desperate to get onto the property ladder by whatever means.
“First-time buyers are the group worst hit by the withdrawal of mortgage products,” said Lawrence Smith of Decision Homebuyers. “So the fact that house prices are lower does not necessarily translate into greater affordability for new buyers, as they now have to stump up more money for the deposit – and using debt to pay for this is a big gamble.”
For press enquiries, please contact Phil Rendall on 020 7099 9026
Email: phil@dhbuyers.co.uk
Web: www.decisionhomebuyers.co.uk
News provided by Decision Homebuyers, a leading UK property company offering a quick and simple solution for selling your home, no matter what the condition.
Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.
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