Rightmove: Mortgage hurdles prove too high for first-time buyers

Rightmove also finds that mortgage challenges are the main factors supressing first-time buyer levels as more than half of respondents stated that their single biggest concern was a mortgage-related issue. Our survey found that 44% of first-time buyers cite ‘raising enough deposit’, and a further 10% ‘meeting monthly mortgage repayments’, as their principle housing concern. These are timely and concerning figures given the imminent mortgage lending summit called by the Government to look into the plight of first-time buyers.

Miles Shipside, director of Rightmove said:

“The level of first-time buyers dropping below one-in-four of all prospective buyers is a big concern for the property market. The desirable level of first-time buyers for a healthy market is typically around 40% of all buyers, almost double the current level, as they perform a vital function in completing chains and aiding fluidity throughout the housing ladder. These findings are likely to heighten government concerns about the scarcity of first-time buyers and it is imperative for the long term
health of the market that a solution to this issue is found.”

Rightmove’s Q1 2011 Consumer Price Forecast reported an increasing sense of price stability among the home-moving public, with around 2 in 5 respondents, the single biggest group, of the opinion that house prices would be at the same level in 12 months’ time. Under such stable market conditions one would expect first-time buyers to be encouraged to get on the property ladder; however Rightmove finds that concerns over mortgage lending are dulling first-time buyer appetites to enter the current market.

Shipside adds:

“It will be interesting to see whether lenders really have the stomach to help more first-time buyers as they are likely to regard it as riskier lending. Any relaxation of their substantial deposit requirements normally comes at a price, with them charging pretty penal interest rates to help mitigate their additional risks of negative equity or defaulting. Gifting of deposits by sellers is a workaround, though requires the property value to still stack up and lenders to play ball. The wealth and credit explosion that the baby-boomer generation enjoyed has left those striving to get onto today’s property ladder in a tough position, unless they benefit from an inter-generational fund transfer – normally the bank of Mum & Dad.”

The difficulties of those looking to own a roof over their heads for the first time is highlighted by the decreasing proportion of first-time buyers purchasing alone, leading the survey to record its highest ever level of those buying with a partner or spouse. This has increased from 62.1% in our Q4 2009 survey to 72.5% in Q1 2011, while the proportion buying on their own has dropped over the same period from 32.7% to 25.5%.

Shipside adds:

“They say that home is where the heart is, and finding love seems to be the only path available for many of today’s generation of first-time buyers as mortgage lending and the economic downturn mean that buying alone is becoming less viable. While lenders so far haven’t budged in finding solutions for first-time buyers, it is the buyers themselves that are adjusting to market conditions by coupling-up in their pursuit of home ownership.”

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