Stagnant house prices, lenders who are reluctant to agree mortgages and a huge jump in the size of deposit needed to buy have been major barriers to first time buyers over recent months. Now, the Government has launched emergency talks amid growing concern that hundreds of thousands of people are being priced out of buying their own home.
These talks begin as new figures show that mortgage lending slumped again in the New Year.
First time buyers need deposits above the average wage
Recent figures from the Council of Mortgage Lenders (CML) showed that many first time buyers had to save over a year’s pay to afford the deposit for a home. The Independent reports that ‘the average deposit jumped from £12,700 at the beginning of 2007 to £31,500 – well over the average annual wage – by the middle of last year.’
Grant Shapps, the Housing Minister, said: “I don’t want to see the current generation completely locked out of the market. It seems to me the pendulum has swung too far the other way now. Even if you’re on a very good salary, you still can’t get a mortgage.”
However, Michael Coogan, director general of the CML, offered words of caution: “It is good to see ministers taking the initiative to discuss how we can look to improve market conditions for first-time buyers. But no one will be surprised to learn there is no simple quick fix for a market that has changed fundamentally since the credit crunch.”
2011 begins with steep decline in mortgage lending
CML figures also showed that mortgage lending in 2011 began on the back foot, with a 13 per cent fall from the previous month. A total of £9.2 billion was advanced during the month, down from £10.6 billion in December and the lowest level since February 2010.
The Independent reports that these figures reflect ‘the current subdued state of the market, as a combination of high deposits required by lenders and the uncertain outlook for the housing market and the wider economy suppresses demand.’
