Buying your first house is always a difficult time. There are so many important decisions to make, and problems to be solved, which combine to make it one of most stressful events that will occur in most people’s lives.
Some of most obvious problems include need to: * find a suitable house to purchase * plough through complicated financial information * choose an appropriate mortgage that will cover cost of house and is within your own strict budgets * save up enough money (usually whilst still renting another property) to cover a mortgage deposit * deal with unfamiliar legal fees, surveys and other costs * make a realistic offer on your prospective new home * waiting to see if offer is accepted * complete purchase * move and get settled in new house, with whatever decorating/rebuilding is required
Given these factors, it is perhaps not surprising that first-time buyers can be first to get spooked by changes in housing market.
First-time buyers (FTBs) make up an extremely important sector of house buying market, and many analysts view them as life blood of whole housing market. Without them a housing slowdown or even collapse of system is inevitable. Recent reductions in number of FTBs purchasing houses, with Scotland achieving its lowest annual total for nine years, and increasing struggles experienced by FTBs trying to get onto first rung of property ladder will have serious knock-on effects, which are already being experienced around much of country.
National Savings and Investments (NS&I) Senior Savings Strategist Dax Harkins said: "Despite a recent cooling house market, house prices have continued to outstrip both savings rates and incomes over last year which means potential first-time buyers need to start saving sooner and harder to get into market."
Whilst house prices continue to increase at a faster rate than people’s incomes there will be fewer people able to afford a house.
In a recent study NS&I found that average length of time required by FTBs, to save for a 5% mortgage deposit, ranged from five years in East Anglia, to three years, nine months in Scotland, with average being four years and nine months, this is nine months longer than a year ago. The average age of first-time buyers also has increased, going from 37 from 31 three years ago. The property website Rightmove has warned that housing market could remain static for several years whilst it waits for incomes of FTBs to catch up with housing prices.
Miles Shipside, commercial director of Rightmove, said "As many sellers are refusing to part with gains they have made, buyers are forced to make up affordability gap…The reality is it will take seven years of static house prices and wage inflation to bridge this affordability gap.”
Marjorie Townsend, head of Edinburgh-based Lindsays Residential, says: "It was recently reported that an average home in Edinburgh costs seven times income of majority of nurses. This is a shocking statistic.”
With over one in six FTBs turning to relatives and more high street lenders offering 100% mortgages, or even 102% from Lloyds TSB and Scottish Widows, to help buyers get onto property ladder, some may be able to squeeze onto first rung, but end up with long-term crippling debt in process, fuelling continued house prices inflation.