In the wake of the credit crunch, which hit the USA in late 2007 and has now began to have repercussions in the UK housing market, uncertainty has meant that property price rises have slowed in most areas of the country, and in some places a drop in value has been seen for the first time in years.
Nonetheless many property experts believe that now is a good time to snap up property, as many buy-to-let landlords have been squeezed by the credit crunch and are therefore looking for quick sales of their property which means lower prices for buyers.
However, even though price rises have slowed and there are now more properties on the market, borrowing the money to buy them has become even more difficult. There are no longer any UK lenders that still offer 125%-plus mortgages, and 100% mortgages also seem to be on the way out. Many lenders are also telling customers that they’ll need a deposit of at least 25% to get the best interest rate deals, whereas previously just 10% was needed.
So, many hopeful first time buyers are now wondering where this all leaves them and their hopes to buy property. Lenders have been quick to point out the upside of the abolition of 100% plus mortgages, which means that homebuyers won’t start out on the property ladder in negative equity. In saying that, however, the lack of lending means that first timers will also have no other option but to get a deposit together.
After a decade of a booming housing market, things are rapidly cooling down, but lenders are definitely becoming much more cautious about who they’ll lend to, and how much they’ll advance. They are now much less willing to lend to buyers with small deposits who have a high chance of overstretching themselves just to make it onto the ladder, at a period where at best, the market is slowing, and at worst, it could crash.
The irony of this situation, is that even though prices are finally slowing – or in some places even dropping – fewer lenders are willing to offer mortgages to buyers with small deposits and are increasing the rates on the small number of mortgages deals which are still available; so once again, first time buyers will inevitably find it difficult to get on the property ladder.
The silver lining to this situation is that if you do have – or can beg, or borrow – a decent sized deposit, then you could pick up a good bargain property. If you don’t have access to such funds, however, you’ll just have to continue saving, and hope the prices don’t shoot up again too soon.
Daniel Collins writes on a number of topics on behalf of a digital marketing agency and a variety of clients. As such, this article is to be considered a professional piece with business interests in mind.
