Door swinging shut faster - 3 March 2008

Posted by Paul Collins No comments

Perhaps I am beginning to sound a little bit like a broken record, but it seems to me that the plight of the younger buyer is becoming ever more desperate, and that no matter what the market conditions, there is little chance for many First Time Buyers (FTBs) to get onto the property ladder.

Perhaps it is all because I am, effectively, a first time buyer myself, but that seeing a way out of the woods of renting is increasingly difficult. At a time when the property market is said to be going through a tough time and prices are dropping in real terms (great phrase that one, a bit like ‘market correction’), there is news that not only is it almost impossible for FTBs to get a mortgage unless they are in a couple, rather than a single person, but that to gain access to the lower interest rates at one of the biggest mortgage lenders in the country, buyers need a deposit of around 25 per cent.

The market is tough for those without a property behind them, of that there is no doubt. As the property boom was continuing for years on end, prices were rising so many times faster than salaries that many FTBs felt they had to saddle themselves with financial commitments that were unrealistic and leave them with something of a stunted lifestyle. Even for those buyers who got in early, the equity in the property they have bought is locked in for years until they are able to afford to extend their mortgage commitments and buy a property further up the housing scale. Effectively, they are waiting for their wages to catch up with property prices.

For those young buyers looking at the moment, as property prices are dropping slightly, FTBs are apparently rushing back into the market. They are not alone. Buy-to-let investors are seeing their opportunity to buy now from vendors exhibiting the first signs of distress, which is leading to the kind of competition in the market that drove prices up throughout the boom. Once again, FTBs are facing the prospect of being priced out of the market by those with equity and portfolios.

The confusing issue now is that it is hard to decide who to blame for this lack of funds in the FTB pocket. While buy-to-let investors are often portrayed as evil entrepreneurs who will stop at nothing to build their property empire, perhaps the rest of us are just jealous that we are not doing the same thing. It certainly seems difficult to criticize the investors when we hear that young adults are relying ever more on their parents and their financial prudence to fund their lifestyles.

Reports saying that young adults are relying more on the ‘Bank of Mum and Dad’ to pay tuition fees, credit card bills, living expenses or the deposit on their first home. In fact, the average amount that parents are giving to their offspring is now well over £12,000, and is rising rapidly. Perhaps if young buyers want to be taken seriously in the property market, and want to get the best mortgage deals, they have to prove that they are responsible enough to manage their own financial affairs.

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