Average first-time buyer age hits 38
On average, house-hunters now can't afford to buy their first home until they reach 38, and only 5% have a sufficient deposit saved.
Restrictions in mortgage availability, together with a lack of finances to save for a deposit have been blamed for the difficulties they face, according to research from Moneysupermarket.com.
There are now just 3,150 mortgage products on the market, compared with 26,693 in July 2007.
Moreover, although products for first-time buyers have increased, with a 47% rise in 90% loan to value (LTV) mortgages, the average LTV for new buyers is still 77%, so they still need to find a whopping 23% deposit to secure a mortgage.
The alternative is to go for a mortgage requiring a smaller deposit, but the rates will be higher so you'll end up paying more over the term of the mortgage. But as and when your circumstances change it will be possible to secure a better mortgage rate with another provider.
Don't rush into buying
David Hollingworth, spokesperson for London & Country Mortgages, advises those considering buying not to rush in as prices are likely to be flat at best.
"They should focus their energy into building as large a deposit as possible. This will improve their options, both in lenders and in available mortgage deals, as lenders continue to charge higher interest rates to those with smaller deposits," he adds.
Clare Francis, spokesperson at moneysupermarket.com, says first-time buyers have been hit the hardest by the economic downturn and there is still limited choice in mortgages.
"House prices may have fallen in many areas but they are still high. This, coupled with the need for such a high cash deposit, is pushing many people out of the market," she adds.
This comes alongside news of a 4.4% increase in rental prices from a year ago in England and Wales. Tenants are now forking out £692 a month on average, rising to £988 for those in London.
On average rents rose by 0.8% in April compared to March, with landlords now charging an average £30 more than a year ago, according to the buy-to-let index from LSL Property Services (which owns the UK's largest lettings agent network).
It blames the increase on a rise in demand for rented property brought on by the extended bank holiday season and warm weather, which encouraged tenants to begin house-hunting.
Tenants arrears have also risen, with 11.8% of all UK rentals in arrears after the bank holiday period.
Loan to value
The LTV shows how much of a property is being financed and is also a way to tell how much equity you have in a property. The higher the LTV ratio the greater the risk for the lender, so borrowers with small deposits or not much equity in the property will be charged higher interest rates than borrowers with large deposits. The LTV ratio is calculated by dividing the loan value by the property value and then multiplying by 100. For example, a £140,000 loan on a £200,000 property is a LTV of 70%.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.