First-time buyers are fighting back

Following news this week that Britain’s first-time buyers may soon be a thing of the past, it seems that those wanting to get onto the property ladder are more determined than ever to realise their dreams of owning their own place and are not letting the fall out from the US sub prime mortgage debacle stop them.

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Analysis from fairinvestment.co.uk, the financial news portal and comparison website, has shown that while overall mortgage enquiry figures for September and October were down, more than three quarters came from first-time buyers who required 100 per cent mortgages, a significant increase in the 57 per cent requiring 100 per cent mortgages in the first quarter of 2007. While just over half again of these enquiries came from first-time buyers.

James Caldwell, Director of Fairinvestment.co.uk, said: “Britain’s love affair with the property market is far from over, despite the recent dip and the gloomy forecasts for the next few years. Our figures suggest that while overall there have been fewer mortgage enquires since the first quarter of 2007, first-time buyers are still keen to seek out a deal and are fully prepared to opt for 100 per cent mortgages if it means getting their own home.”

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A similar trend has been reported by a number of lenders such as The Co-operative Bank who has seen a 30 per cent rise in 100 per cent mortgages as a proportion of its first-time buyer lending since the start of this year while Alliance and Leicester has found a willing market for its new mortgage launched in April which offers loan-to-values of up to 125 per cent.

Undoubtedly, increased competition has helped reduce the interest rates on these types of mortgage loans, but the concern is that there will eventually be a premium to pay and this is likely to move higher following the credit squeeze. Already, a number of smaller lenders have taken steps to withdraw products over the last month while rates for others have started creep up, making those with 100 per cent mortgages vulnerable to price falls as there is no equity to lessen the impact.

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Caldwell continued: “The demand for 100 per cent mortgages has shot up over the past year. With interest rates having risen five times since August 2006 to keep down inflation, slowing the market as a result, buyers are naturally being stretched to their limits. While 100 per cent mortgages may sound like the answer, even just a 5 per cent deposit could provide the homeowner with some peace of mind under the current climate.

“Our advice would be to compare the market and see what you can realistically afford to borrow. There are still some good deals to be had with many of the major lenders and now is a good time to be shrewd by exploring all the possible choices.”