It will come as no surprise to many that first time buyers have been having a hard time of things recently and figures from The Council of Mortgage Lenders do little to change that view.
It has published research of the first time buyer market that helps shed light on just how big an impact the changing mortgage market has had on first time buyers’ ability to get on the ladder. The tightening in the mortgage market since 2007 has seen lenders requiring larger deposits. As a result the average deposit of a first time buyer rising from 10% in 2007 to as much as 25% in 2009 and still stands at 20% now.
That is clearly quite a hurdle for most potential first time buyers to deal with. That is very evident in the work that the CML conducted on just how many are seeking help from parents. In 2005 69% of all first time buyers were buying under their own steam and even by the final quarter of 2007 62% of first time buyers were unassisted.
Since then not only has the number of first time buyers been slashed but the proportion of unassisted buyers has dwindled to just 36% of all first time purchases in the third quarter of this year.
Although there is quite significant regional variation these numbers illustrate just how vital the support of the Bank of Mum and Dad is for a first time buyer in the current market. Much of the help will come in the form of a cash gift but some products aimed at first time buyers in recent years have also sought to enlist parental help to enable a higher advance against the purchase price. That might be as guarantor, including them on the mortgage or using alternative assets as additional security.
Although the market for those with smaller deposits has gradually improved over the course of 2011 it remains likely that we’ll continue to see better lender choice and interest rates for those with bigger deposits.
There’s still plenty of uncertainty but the figures also show that property ownership remains high on the list for many first time buyers, with 85% suggesting that they hope to buy their own property. Mortgage availability will be crucial to these aspirations becoming a reality.