Housing Market News And Views First Time Buyers: Should You Buy ?

Date Published:

09/02/2009

First time buyers are crucial to the housing market because without them there is very little upward pressure that enables people to move and the property market wheels to turn. The Government, through its sponsored HomeBuy schemes, and housebuilders independently are offering all manner of incentives and deals to entice first timers into the market. But where should you be looking?

By Gordon Miller

How Easy Is It For First Time Buyers To Get A Mortgage In 2009?

At the moment, it's trickier than ever. RICS reports that the gap between new buyer enquiries and the number of mortgage approvals is increasing. New buyer enquiries, according to the November 2008 RICS housing market survey, are at their best level since October 2006, whilst the Bank of England's mortgage approvals data in the same month sank to its lowest point on record.

A lack of liquidity in the global economy is creating the bottleneck - and is also creating a lack of consumer confidence. The term broadly means banks are not prepared to lend money very willingly, which in turn means first time buyers cannot easily obtain mortgages. The effect is a stagnant housing market, where no one can borrow and house prices atrophy.

Will The Situation Change Soon?

The Government is attempting to encourage greater lending, and in January 2009 provided the Bank of England with a £50billion fund to buy assets from private sector companies. In addition, A new insurance scheme has been set up which means the banks can effectively take out an insurance policy with the Government that will pay out if borrowers default on their loans.

Commenting on the government's bank guarantee package to stimulate lending Michael O'Flynn, Content Editor for FindaProperty.com, says, 'This new raft of proposals from the government is very welcome news and should allow lenders to make more money available to house buyers.'

'The insurance side of the plan offers lenders protection against future losses, which should free up lenders to commit more money to customers. Significantly, access to the scheme comes with a commitment to support lending to creditworthy borrowers.'

'The plan to guarantee mortgage-backed securities should also give lenders easier access to funding on the wholesale markets. This should boost lending for house purchases - currently at an all-time low - which in turn should boost market activity and help to put a floor under house prices.'

'However, it remains to be seen whether this action will provide the "shot in the arm" needed to get the housing market moving. The effect very much depends on who, how and in what conditions the banks that take up the scheme pass on the finance to borrowers. If these measures have little impact on relaxing lending criteria, then as far as homeowners are concerned, we're back at "square one".'

How Can First Time Buyers Go About Securing Lending?

The current economic and housing market volatility makes reporting on bank (interest) rates an exercise in obsolescence – no sooner have we reported on the latest lending rates and deposit required, for example, then the banks amend them.

It’s not even wise to suggest you might be better fixing a mortgage rate or going for a tracker because who on earth could have predicted the last year’s economic events? And do even senior analysts truly know what is likely to happen next? In truth, and off the record, the answer is no.

The best course of action? To seek free advice from an independent financial advisor, and ideally more than one to get a good idea of what's out there.

More Information For First Time Buyers

Whitehotproperty.co.uk is a website that exclusively offers chain-free properties being sold by home builders and mortgage lenders which have been priced to sell. One in four also has a buyer incentive - paid for by the sellers to encourage buyers to buy, making them ideal for first time buyers.

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