Deposits not income multiples are holding back first time buyers, as opposed to servicing debt costs.
Nationwide research highlights that decreasing interest rates have rendered house prices more affordable. However, lenders cannot keep pace.
Potential first-time buyers can afford the interest payments on a mortgage, however, they are not able to purchase their first property as mortgage providers will not lend them enough, or deposits demanded are too high.
Nationwide highlights that in 1994 over a third of Britons, aged 20-24 owned their own homes . Presently, that figure has decreased to 20%.
The first time buyer represents 40% of all house purchases, however, this figure can be deceptive.
Currently, half of them are 'returners'. Those who have owned properties in the past and have spent a period renting.
The Nationwide emphasises that mortgage payments for entire cost of a first-time buyer home would amount to 42% of average take-home pay.
Lenders currently offer mortgages at an average of 3.1 times earnings, so people on average salaries can only borrow £85,250.
Thus a deposit of £47,000 is needed to buy a first-time buyer's home on a mortgage of that size.
Potential first-time buyers would need to earn £38,000 plus to borrow at 3.1 times income, leaving a 10% deposit; in London this would rise to £62,000.
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Price Not the Issue for First Time Buyers
Wed, 21 Jun 2006
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