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Various banks have come up with innovative methods to help facilitate ability of FTBs to purchase a house which, whilst not addressing real problem of house prices, will allow more people to own their own home.
A guarantor mortgage can increase amount that can be borrowed, as long as borrower’s parents have enough income to cover all their own debts, plus their child's mortgage each month; however parent will not have to make any payments themselves unless their child’s mortgage goes into arrears.
An offset mortgage could mean that money from a parent’s savings account can be offset against their child’s mortgage. Although parent would not receive interest on their savings, reduction in amount to be paid by their child could make a big difference, and they would not incur tax on amount either.
A ‘Professionals’ mortgage is a possibility for certain workers, which allows them to borrow more than their initially low-pay career would usually make them eligible for, on understanding that their future pay will increase rapidly as they become high earners.
Whilst some may urge for caution to prevent possibility of building up financially crippling levels of debt, others see a need for buyers to act fast.
Marjorie Townsend, of Lindsays Residential, believes: “The best advice for first-time buyers is to move quickly …There really is nothing to be gained by waiting for a competitive closing date, which will drive price up. There are lots of sellers out there who are eager to sell and whose particular circumstances may require a quick transaction."
Overall it seems that situation for FTBs will continue to prove difficult unless a major change occurs that bridges gap between income and house prices for those in most need. Recent government initiatives such as Shared Equity scheme, that allows part ownership of property, may go some way to enabling some FTBs to start out, but Ed Davey MP, Liberal Democrat housing spokesman, believes policy could make housing even more expensive, "It seems to be looking at demand side which could stoke house price inflation and make problem of affordable housing even worse."
Until issue of supply and demand is addressed, there will continue to be problems. According to Barker Review, which was published in April, up to 140,000 new homes need to be built each year in UK if supply is to keep up with demand. Even if new homes are built at this rate, time taken to stabilise market will mean further delays for prospective new buyers who want to own property.
Further information Moneynet mortgage comparisons (http://www.moneynet.co.uk/mortgages/index.shtml) Full NS&I research (http://www.nsandi.com/press-room/press-releases/pr2004127.jsp) House price reports (http://www.rightmove.co.uk/template/publicsite%2Caboutus%2CRTPRArchive.vm)
Richard lives in Edinburgh, occasionally writing for the personal finance blog Cashzilla ( http://cashzilla.blogspot.com/ ), and praying for a huge lottery win.