Traditionally, first time buyers have been the foundation upon which the housing market has been based. Without the first time buyer at the bottom of the property ladder, those already on the way up the rungs had been unable to continue to move on up.
This all changed with the explosion, at the end of the 1990’s, of the “buy to let” property market. During the 2000’s “buy to let” mortgages became common place and far easier to obtain, encouraging an ever growing army of amateur landlords. This, in turn, pushed up the price of the lower end properties and ultimately priced many potential first time buyers out of the market unless, they could take a loan (or better still, a gift) for the deposit from the bank of Mum & Dad, or alternatively, source a 100% mortgage.
With the downfall of Northern Rock, followed by the “Credit Crunch”, 100%, even 80% mortgages, became items of the past, meaning that the only people who were in a position to buy were those with a sizeable deposit, either held within the equity of their existing property or as cash in the bank or a very generous “Bank of” Mum & Dad.
The reintroduction of the 90% mortgage may well be of assistance in encouraging first time buyers back into the market. However, with an interest rate of around 6% for that level of mortgage funding there will be many potential first time buyers who would still find the monthly repayments rather steep and possibly more than they would currently be paying in rent. It would be necessary to factor in a “budget buffer” in the event that interest rates increase, as is likely during the course of the coming year. However, since there are still bargains to be had in the property market, if the right property can be found at the right price and the mortgage repayments are less than would currently be paid in rent, this could well be a great time to see first time buyers back in the market.
If you would like to know more about how Newnham & Jordan can help you through the home buying (conveyancing) process please visit our website for further information or contact us for an informal chat over the phone or in person to see how we can help.
This article is intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
