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BLOG: Are we witnessing a false dawn for first-time buyers?

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Written by: David Copland
10/08/2016
The growing strife of first-time buyers has in many ways been the defining characteristic of the post-crisis mortgage market.
BLOG: Are we witnessing a false dawn for first-time buyers?

However, the latest figures from the Council of Mortgage Lenders paint a more positive picture for those hoping to get onto the housing ladder. First-time buyer lending rose 23% year-on-year in May, though the figure fell 15% in April.

Does this show that first-time buyers are finally taking advantage of cheap mortgage rates in the face of reduced competition from landlords, or are we witnessing a false dawn as first-time buyers still struggle to afford a deposit?

Firstly, it is fair to say the issue of affordability has far from disappeared, especially for Londoners. Recent Emoov figures revealed that more than 90% of London boroughs have had the average price paid by first-time buyers soar by more than £100,000 in the last four years. Indeed, across the country many would be first-time buyers are trapped in a vicious rental cycle, perpetuated by the government’s recent assault on landlords.

That said, Downing Street has recognised the need for a targeted approach to the housing policy with Help to Buy being tailored across the regions. For example, through Help to Buy in London, borrowers are able to access up to 40% of the value of a new home, enabling first-time buyers to better afford and find the right home. Looking across the UK, lenders too are following suit. For example, Natwest recently reduced rates on its 95% LTV Help to Buy mortgage guarantee scheme deals.

Looking ahead, prospective buyers will be watching the overall direction of house prices as the biggest indicator that now is the right time to buy. So long as the rise in house prices continues to far outstrip stagnant wages and house building continues to lag, landlords will continue to see property as a long-term investment and the dream of affording a deposit will become ever more distant for first-time buyers.

David Copland, director of mortgage services at TMA, a company distributing mortgage products to advisers 

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