First-time buyers

Overview

Buying your first home can be a hard enough process at the best of times, but in today’s rapidly growing market it is more difficult than ever. Property prices, especially in the cities, have soared beyond expectations – leaving many first-time buyers literally out in the cold.

To make matters worse, very few mortgage products have evolved to compensate for the dramatic incompatibly between house prices and wages. Some products, such as 110 per cent loan-to-value mortgages and five times annual salaries, do exist, but they tend to mean more risk for the buyer rather than for the lender.

The recent rises in interest rates have also had an impact on those wishing to enter the property market – especially as pundits are predicting further increases.

However, it is perhaps the sheer competition that poses the biggest problem for potential buyers. Block viewings are not uncommon, whereby perspective purchasers simply view the house as a group, and then race to be the first to put in an offer. If a member of this group is a professional developer or cash purchaser, then it is not unusual for the first-time buyer to be left behind.

Social impact

The social impact of first-time buyers struggling to get on the property ladder is perhaps going to hit harder than first thought. Property ownership has traditionally provided a secure nest egg for retirement at worst, while at best it has created some extremely wealthy individuals.

Not having the security of having fully paid for your own home by the time you reach retirement can have a dramatic effect – especially with pensions not performing as well as they once did.

There are plenty of pre-retirement concerns too. Since saving will have to take a front seat, disposable income will be reduced – resulting in a slower economy. Parents may not have the financial ability to educate their children as they desire, and the NHS will suffer as private healthcare becomes an unaffordable luxury.

Next: Where will it all end? >>

Related Articles

• Buying a Property in England or Wales
• Types of Mortgage
• Choosing a Mortgage
• Buying Off Plan and New Build
• Buying at Auction