For First Time Buyers: To Buy Or Not To Buy


by CaroleBayliss - Date: 2008-05-07 - Word Count: 618 Share This!

For first time buyers hoping to step on to the property ladder the current market uncertainty is a cause for concern. Although house prices are falling the cost of borrowing is rapidly rising and it is becoming increasingly difficult to raise the money for a first home.

The industry criticised the government for failing to help first time buyers in the budget at the beginning of March. Chancellor Alistair Darling did announce that stamp duty will not be required on shared ownership homes until people own 80%. However those who opt for full ownership will still be hit hard. According to the Halifax, stamp duty has risen by 83%.

"The Budget is a missed opportunity to help home owners, and those aspiring to property ownership," comments Richard Farr, Director of the Association of Mortgage Intermediaries.

"We would have expected the Chancellor to address the challenging market conditions and revise stamp duty. Alistair Darling's decision to abolish stamp duty for first time buyers who own less than 80% of their shared ownership home is a positive first step. As are his plans to introduce a new shared equity scheme for key workers who can only afford 50% of their home. However, neither of these schemes will help the substantial number of ineligible applicants who are also struggling to purchase their first home."

Katie Tucker, Technical Manager at mortgage company John Charcol says first time buyers should consider whether or not, now really is the right time to buy. If the answer is yes then she warns that they have no choice but to save a 10% deposit.

Until recently it was possible to borrow more than the price of your new home. But this type of deal is rapidly disappearing and lenders are demanding larger deposits.
"It isn't just a matter of 'can we?' but also 'should we?'; first-timers should reconsider very carefully if this is the right time to buy, given that properties in many areas are expected to lose value. Unless household income is strong enough for a good amount of capital to be paid off monthly, there is a risk of falling into negative equity if buying without a decent deposit."

According to a recent survey carried out by Abbey Mortgages the average first time buyer estimates that they will need a deposit of £22,800. They expect to achieve this within three and half years of starting to save. However the figures do vary dramatically according to region. For example those in in the South East estimated they would need as much as £35,000 compared to £13,000 in Scotland.

"Saving £23,000 or more for a deposit is no mean feat, particularly if you let distractions get in your way," says Nici Audhlam-Gardiner, Director of Abbey Mortgages. But if you're single minded and set yourself a realistic savings target then you could find yourself making an offer on a house sooner than you think."

The key is to shop around for a mortgage and seek advice from a broker that will assess the entire market. As Charcol's Katie Tucker points out: "The Bank of Ireland still offers the 'First Start' a 100% loan-to-value when a parent's income is included, and Bristol and West has a 95% mortgage at 6.25% for a £799 fee, crucially with no Higher Lending Charge (HLC)."

A tracker mortgage is also an option. According to the Council for Mortgage Lenders (CML) this type of mortgage is increasingly popular with first time buyers as they stand to benefit if interest rates are cut. Tucker predicts we could see a cut in rates in May of this year.

So although the market may appear daunting there are still deals available. But act quickly as they are changing by the day.

Related Tags: property, money, market, mortgage, home, first time buyers

Carole is an author of several articles pertaining to Mortgages, Insurance, Debts, Credit, Loans, Life Insurance, Bike Insurance, Van Insurance, Health Insurance, Remortgaging, Refinancing and other Business and Finance related articles.

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