First-time buyers at lowest level for two decades

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First-time buyer numbers have dropped below 350,000 for the first time in 20 years, making home ownership a distant prospect for millions.  
New figures from GfK Financial show that only 347,000 people took out a mortgage for the first time in the last year, 100,000 fewer than the previous low in February 1993.

This compares with a high of more than 700,000 in 2004/5. 

The data, from GfK’s Financial Research Survey, reveals the serious effect that tightening credit conditions, static incomes and property shortages have had on young people’s prospects for home ownership.

Saving up a decent deposit – necessary to get the best mortgage deals - is the main problem for most would-be first-time buyers. Fewer than one in six have enough money to put down as a deposit.

Ben Steer, GfK's financial director, says: “The survey tells a story that is keenly understood by millions of young people across the country. Increased prudence on the part of lenders has priced many out of the housing market – the challenge for these financial providers is to create products which will assist young people, without creating the conditions that sparked the crisis in the first place.”

So how can first-time buyers get their foot on the property ladder?

Ray Boulger, senior technical manager at broker John Charcol, says it’s important to have a decent credit record to stand a chance of getting a mortgage: “Make sure you are on the electoral roll - even if you don't plan to vote,” he says.

“Never go overdrawn unless you have agreed an overdraft facility and if you have a facility, never exceed it. Make sure no cheques or direct debits bounce. If you are renting don't miss any payments,” he adds.

Melanie Bien, director at Savills Private Finance, suggests getting an ‘agreement in principle' from a lender before you start property hunting. This will give you an idea as to how much you can borrow and this is really important as lenders are requiring bigger deposits than before - up to 25% of the property value for the best rates.

“The other advantage is that vendors will take you more seriously. Property chains are breaking far too frequently when a buyer has to pull out of a transaction because they can't get the necessary finance and many vendors have lost time and money when their sale has fallen through,” says Bien.

She adds: “So expect an estate agent to ask whether you have already arranged a mortgage before your offer will be accepted.”

It’s also worth checking out government-backed affordable homes schemes such as shared ownership. These allow first-time buyers to step on the ladder with a much smaller deposit than they would need on the open market.

The option is there to buy the property outright eventually and the rent you pay on the 'non-owned' portion will usually be less than your mortgage.

These schemes used to be restricted to certain workers; however, many are now open to anyone with an income of less than £60,000.

For more information on what options you've got, it could be worth seeking the advice of a mortgage broker. To find one in your area, click here.