Affordability increasing for first time buyers as housing market stalls

Affordability increasing for first time buyers as housing market stalls

We can report today that house prices and the housing market are likely to stall in 2011 so say the Centre for Economics and Business Research (CEBR). They have estimated that prices will be 1.7% lower by the end of the year, which whilst good news for those looking for first-time buyer mortgages, may not be for confidence generally.

First time buyers to take advantage of lower prices still need an appropriate deposit with most lenders. However, given low interest rates and fall in prices the think tank has indicated that affordability for those seeking first-time buyer mortgages will reach an eight-year high this year.

New research by Barclays suggests that general mortgage affordability has hit its best level for ten years. A poll of more than 2,500 homeowners also found that 13% say they can easily afford their current mortgage repayments and are not worried if interest rates rise. Meanwhile 39% class themselves as comfortable, with some room for manoeuvre, and 28% are stretched but still have disposable income available to help them navigate a rising interest rate environment.

Of those who said their mortgage was less affordable than a year ago, more than a third (36%) cited lower salaries as the cause, while an additional 29% said their other outgoings had increased.

The CML recently indicated that those aged under 30 are now heavily reliant on parents and other relatives for financial support. It estimated that, in 2005, 38% of first-time buyers aged under 30 required help with their deposit. By 2009, this had reached an estimated 84%.

The CML also revealed that the typical age of first-time buyers who did not receive assistance and were unlikely to be former owner-occupiers returning to the market increased from 28 in 2005 to 31 in 2010.

When asked specifically about coping with rising interest rates, it was great to hear that 77% either already have a plan in place to manage increased monthly mortgage repayments or say they will be unaffected as they are on fixed rates.

Yet, homeowners who are not already thinking about their mortgage certainly need to be. Barclays estimates there are still around 800,000 borrowers sitting on their current lender's SVR who could benefit from escaping and switching to a more competitive mortgage deal.

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