First Time Buyers Borrow Record Salary Multiples

According to the Council of Mortgage Lenders (CML) first time home buyers are now on average borrowing 3.27 times their annual income which is the highest average multiple on record. Not surprising when you consider the £29k minimum the RICS (Royal Institution of Chartered Surveyors) says they need to have saved up to pay the deposit and stamp duty on their first home alone.

Are they being serious? How many people do you know who do not yet own their own homes but have £29,000 stashed in the bank? The single biggest hurdle for a first time buyer is finding that deposit money. I come from an era long long ago way back in 2001 when all I needed was a mere £15,180. I only had to wait until I was 31 to do so, and rely on some fortuitous timing with my career change into IT and an increase in mortgage lender acceptance of contractor’s incomes. Without all of that coming together I could well have still been one of the victims of the affordability statistics.

There is a glimmer of hope though. In 2004 the Halifax reported the lowest number of first time buyers in a quarter of a century, and at rock bottom they hit just 27% of the home buying public. Those figures have risen over the last year or so, helped I’m sure in no small amount by the rise in the acceptance of co-buying, a reported rise in assistance from mum and dad, and the higher public awareness of the Government’s HomeBuy schemes, to a level in the late 30%’s (keeping in mind that the 20 year average says there should be around 45% first time buyers buying in the market place). Unfortunately in recent months this has started to slip again and we are back down to the mid 30%’s. Not drastic so long as the downward trend does not continue.

Property prices have continued to rise in the majority of regions around the country and the result has been first time buyers looking for other routes onto the property ladder than traditional means. Many families are beginning to help their kids out by refinancing their homes and putting the increased value of their properties to work for them. The flat-sharing market is still booming as people co-rent to save on living costs hoping to build up their property pot of gold to the magical £29,000 level. And more and more innovative ideas are appearing on the market to help the first time buyer into their own homes. I was talking to a new home builder today who was looking into setting up their own private shared equity scheme to help people buy their new homes in Manchester’s city centre. More and more new home builders are having to consider innovative ways of presenting their property to the starter end of the market, and this can only spell good things for the property newbie out there.

With November on the horizon and the New Year looming, what does 2007 have in store for the property market? Another small rise in the Bank of England Base Rate? Maybe. Property prices continuing to rise slowly but steadily? Probably. An increase still further in the gap between the property haves and the have-nots? Quite likely. But one thing is for sure, we live in a country that is waking up to the realities of an affordability crisis, and we are not sitting back and accepting it. The thinking caps are on and more and more solutions for our first time buyers are surfacing every day to counter this problem.