Have you been priced out of the housing market?
July 1, 2008
When industry analysts and economists began to make predictions last year that the ten year housing boom was finally over, and house prices in the UK would come tumbling down over the months to come, many first time buyers pricked up their ears and rejoiced, thinking that it was at last time for them to take their first tentative steps onto the property ladder. With house prices having soared over recent years, many would be first time buyers had found that it was impossible to get onto the property ladder due to affordability problems, so this prediction came as welcome news to most.
However, the rejoicing didn’t last for long. In fact, if you are a would be first time buyer that has been thinking of purchasing a home there is a good chance that you are still priced out of the market. This is nothing to do with the analysts being wrong about house prices falling – quite the contrary, as figures show that house prices have been falling over recent months and are set to continue falling over the remainder of this year and into next year according to many officials.
The reason why so many first time buyers are still priced out the market is because of lack of affordability due to other factors rather than just based on the price of a property. Property prices in the UK are still high, although they are now lower than they were this time last year. However, they are still considerably higher than they were two years ago or three years ago. However, this is not the only problem that now affects the average first time buyer.
The global credit crunch that came to the UK last year has resulted in a radical change in the mortgage lending market. Lenders have had to tighten them lending criteria, which has made things increasingly difficult for the average first time buyer. The number of mortgage products available on the market has gone down by two thirds compared to last year, with fewer than four thousand mortgages on the market now compared to over fifteen thousand last year before the onset of the crunch. Interest rates have been pushed up despite cuts in the base rate. The arrangement fees on mortgages have soared, some coming to thousands of pounds. And lenders are now demanding a bigger deposit, with the once popular 100% mortgages being taken off the shelves altogether.
It is thought that over 28% of potential first time buyers cannot afford even the cheapest property in their area on most regions, with this rising to over 40% in London.
One industry official stated: ‘While house prices are falling, access to the property market is being increasingly limited by the costs and more restrictive terms of a substantially reduced supply of mortgage finance. Without further measures to restore the availability and accessibility of mortgage finance there is the risk of a severe downturn.’
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