Newspaper article The Evening Standard (London, England)

First Tim-Time Buyers Facing Their Worst Ever Struggle; Nightmare of Loans Seven Times Salary

Newspaper article The Evening Standard (London, England)

First Tim-Time Buyers Facing Their Worst Ever Struggle; Nightmare of Loans Seven Times Salary

Article excerpt


FIRST-TIME buyers are facing their toughest ever struggle to get established on the housing ladder, experts said today.

A survey of purchasers reveals that young buyers must load themselves up with unprecedented mortgages up to seven times their earnings or raise massive deposits to purchase even the smallest of flats.

The quarter-point increase in base rates announced by the Bank Of England will make the problem even worse, adding [pounds sterling]15 a month to a typical [pounds sterling]150,000 repayment mortgage.

Experts warned the huge hurdles first-time buyers now face could threaten the stability of the entire property market and have called on the Government to help them out.

Economist Mark Hemmingway of the Halifax said: "First-time buyers are the heartbeat of the property market and things have never been harder for them the problem is particularly acute in London and the South-East.

"People are having to pool their resources with friends, get help from parents or delay going into the market altogether.

"The Treasury raises [pounds sterling]4 billion a year from stamp duty and it is time some of that was ploughed back into the market."

Spiralling property costs mean the number of first-time buyers is at a 30-year low and their average age has risen from 28 to 33 in the past decade.

Our poll uncovered the extraordinary lengths first-time buyers - often already loaded with debt such as student loans - are now forced to go.

One persuaded his parents to invest their retirement funds in his Twickenham flat, while

another swapped a monthly rent of [pounds sterling]162 in York for a [pounds sterling]700 a month mortgage and key-worker loan to buy a tiny flat in Olympia.

Latest figures show the average first-time mortgage in London has almost trebled in a decade, from 52,978 in 1993 to [pounds sterling]143,689 last year.

The typical mortgage is now 3.16 times earnings compared with 2.43 times a decade ago.

Deposits have become far bigger to try and bridge the widening gap between salaries and property prices. In 1993 the average deposit was nine per cent of the purchase price, and in 1996 it fell to as low as five per cent. The figure last year was 15 per cent.

Sue Anderson, of the Council Of Mortgage Lenders, said: "They're not putting up these huge deposits because they want to, but because they simply cannot stretch their borrowings far enough. They are increasingly having to rely on their parents releasing some of the equity in their own homes to help them out."

First-time buyers have become increasingly dependent on schemes such as housing association and government equity grants available to key workers - but they have to share any profit they make on their new home when they come to sell it. …

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