A quiet week for housing and mortgage news with no house price surveys to report.
However, if you are a first time buyer then read on, there may be some light at the end of the tunnel with the average deposit needed starting to show signs of falling.
Average deposits for first time buyers fall
New figures have shown that the average deposit, put down by first buyers, has fallen below 20% for the first time since the height of the credit crunch in November 2008.
The data, produced by the Council of Mortgage Lenders (CML), shows that the average deposit for a first time buyer in July was 19%.
Since the credit crunch first time buyers have found it harder to obtain mortgage finance, mainly because of the larger deposits demanded by most mortgage lenders. Industry experts believe that the lack of mortgage finance for first time buyers is one of the main reasons why the housing market is so stagnant in the UK.
The drop in the amount of deposit needed is due to the larger number of higher loan to value mortgages which are becoming available, partly as a result of government initiatives such as the Funding for Lending scheme and the NewBuy scheme.
First time buyers predict a 10 year wait
In the same week that the CML released their figures, a new survey, this time from Post Office Mortgages, shows that first time buyers think they will have to save for 10 years to be able to afford a deposit.
The survey found that would-be first time buyers believe that they will not get onto the housing ladder until they are 35 years old. This represents a significant rise, over a relatively short period of time; between 2005 and 2009, when the credit crunch was at its worst, the average age of a first time buyer was just 30.
The biggest impediment to getting a mortgage for the majority of first time buyers is the size of the deposit needed. Even after the changes reported by the CML, a 19% deposit is still beyond the means of many would-be first time buyers. Many of whom, the survey also discovered, are also nervous that they will not be able to afford the monthly mortgage repayments.
Responding to the survey, John Willcock, Head of Post Office mortgages, said: “The average age of a first-time buyer has been creeping up over the past 50 years and a perceived 10-year wait to raise a deposit doesn’t help matters.”
He continued: “The sheer size of the deposit is the most daunting thing for would-be first-time buyers, but it appears to be worth the wait if it works out cheaper than renting.”
Demand falls, whilst house sales remain constant
The Royal Institution of Chartered Surveyors (RICS) has reported a lack of demand amongst homebuyers in August, possibly due to the distraction of the Olympic Games.
However, RICS members reported that house sales over the past three months have been at similar levels to the rest of 2012.
In a mixed report, members said that the number of new instructions had remained unchanged but that prices were dropping, although at a slower rate than in previous months.
Ian Perry, RICS spokesperson, said: “Little changed in the housing market last month. Despite the Olympics taking centre stage throughout much of August, it didn’t have any real impact on the proportion of sales going through.
“Understandably, the amount of people out looking at property fell away slightly but, generally speaking, demand held up fairly well.”
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