In a desperate bid to leapfrog onto the first rung before it moves even higher, first-time buyers (FTBs) are grabbing at almost anything, including mortgage multiples of up to 5 times their income and 25-year agreements. However, these reckless, quick fix measures will undoubtedly leave the majority suffering unnecessarily further down the line.
FTBs are also twice as likely to offer above the asking price on their chosen property, with an astonishing one in four admitting they will do so straight away in order to secure it. This might seem like a prudent move, but actually a little less haste and a little more negotiation can work wonders when it comes to shaving a few thousand off the asking price especially considering it is the FTB who has the advantage as they arent already part of a chain.
Katy, a first-time buyer from the South East advises others: Be brave and put in a low offer for a place you want – you never know – and if it’s not accepted you can always raise it. We’re not great hagglers in this country but we should be, especially for things as expensive and important as houses.
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This growing panic is not as unfounded as it might seem though, as the huge changes afoot in the property market over the last decade have seen first-time buyers truly priced out of the market. Whereas 1997 saw the average FTB income fall broadly in line with the average earnings of someone in their twenties, the end of 2006 saw only 10 per cent of young people earn an income comparable to that of a FTB at £33,202.
Add to this the fact that houses in nine out of ten of all UK towns are priced out of the reach of first-time buyers and the picture begins to take on a rather gloomy perspective. The average property outside of London has now broken through the £150,000 barrier (£250,000 in the capital) and average stamp duty has more than doubled in the past 5 years to reach a massive £1,500, a figure which soars to a minimum of £7,500 in the capital.
David Stubbs, senior economist at RICS believes that spiralling house prices have created a property glass ceiling for FTBs, leaving them with few options to give them a leg up onto the property ladder. Beth Vincent, a 22 year-old graduate from London, echoes this statement believing it is imperative to get on the property ladder as soon as possible: The only way to for someone is my position to be able to afford to buy in London is jointly with a friend. We’ll have to ask our families for help to raise the deposit but luckily they feel the same way that we do.
Repaying a mortgage might be daunting, but it is much more worthwhile than paying huge rent bills with no ultimate gain. It would be nice to pay off a portion of my student debts and have some financial freedom but the risk is that even in a couple of years time, it will be much harder to raise the necessary funds.
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Most will go to the Bank of Mum and Dad for a pain-free cash injection, while others who prefer to go it alone will opt for a combination of alternatives such as buying with friends, living in an undesirable area or even rushing into buying with a partner.
These might not seem like the most ideal options but they are actually far more preferable than the desperate measures some others opt for especially when considering that the average mortgage drains a massive 17.8 per cent of income.
Instead of backing off, buyers are showing increased determination; borrowing more than the value of their property, taking interest only mortgages with a buy now pay later approach and even buying tumbledown properties miles from where they need to live so that they can do them up for a profit, without thinking about the extra funds this demands. One in ten are so serious about getting on the property ladder that, if given the ultimatum, they would gladly forego sex to get their hands on a place of their own.
The other option available to FTBs is shared ownership, which allows individuals to take a mortgage out on a share of a property and pay rent on the remainder, gradually upping their share until they own the property outright. The scheme is designed solely for those in housing need with priority given to existing public sector tenants or those on local authority or housing association waiting lists.
In addition up to four people can enter into joint ownership as part of the scheme, but they must all individually and jointly meet the eligibility criteria. Borrowers do however have to pay all the standard costs associated with a mortgage, such as the cost of a survey, stamp duty and legal fees.
Warren Bright, chief executive of propertyfinder.com advises FTBs to be realistic about their situation saying: The desire to own a home remains deeply ingrained in the national psyche. Neither profound social changes in the way we live, move and work, nor high house prices have diminished Britains appetite for bricks and mortar. Not the best of news for the ever-struggling British first-time buyer.
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