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August 2008

First Time Buyers Creep Back

First time buyers (FTBs) are slowly starting to return to the market as affordability improves and lenders reduce mortgage rates, according to Spicerhaart Financial Services.

However, the Government must act now and end the speculation on stamp duty or risk scaring these buyers away, the group warns.

Its most recent survey shows that following a drop in FTBs, numbers are now beginning to rise with a 1% increase recorded last month. FTBs made up over a third of all purchasers in July.

Steve Cox, operations director of Spicerhaart Financial Services, comments: “With property prices falling by 15% in many areas already this year, there are growing opportunities for first time buyers to get onto the property ladder. This group is vital for the overall economic recovery of the country.

“If the Government does introduce a stamp duty holiday, this can only be further good news for these buyers. However, prolonged speculation will be damaging to the whole market at a time when it is just beginning to pick up. The Government has to act now.”

The research also found the amount of debt FTBs are taking on has reduced compared to last year, with 25% of buyers able to get a mortgage with an income multiple of three or less times their salary in July, compared with 18% at the same time last year.

There has also been an increase in the number of FTBs choosing long term fixed rate mortgages compared to last year with 27% now opting for these products compared to 19% in 2007.

Cox says: “A year ago first time buyers were choosing two year fixed term products as they were keen to regularly review their mortgage and seek out the best deal. However, the changes in the mortgage market and the tightening of lenders' criteria have meant that borrowers are now looking to lock themselves in for the long term. This is particularly key for first time borrowers who will benefit from the security of knowing exactly what their monthly repayments will be for the next few years.

“As the Bank of England reveals that the cost of mortgage is finally falling, there is further good news on the horizon for all borrowers with a number of banks set to announce further mortgage rate cuts and new products. This will aid consumer confidence and create improved liquidity in the lending market. With new products entering the market and a reduction in borrowing rates, now is an ideal time for potential first time buyers to step onto the property ladder and take advantage of the lower house prices.”

The data used is based on a sample of mortgages transacted by Spicerhaart Financial Services in Spicerhaart’s 250 branches of haart, Spicer McColl, Felicity J Lord and Darlows throughout the UK.