The property climate for first time buyers

For the vast majority of people, making that first property purchase is going to be the biggest financial undertaking that they have taken thus far. Raising the finances and saving for a sizeable deposit is one thing, but you also have to make monthly repayments and even pay off capital. It’s almost always going to be more expensive than renting – but you’ll own your own place at last.

Timing your jump into the market is never easy, and finding the best price for a property can be taxing. This is especially considering the boom in housing prices in the past decade. House prices have rocketed by some 182 per cent over the past 10 years, from an average price of £70,000 in 1997 to £197,000 today according to Halifax Building Society. First time buyers have had to time their leap into the market carefully so they could get the right price, and, if this has been achieved, many have made easy and substantial profits.

While first time buyers have managed to get their foot on the housing ladder despite the huge increase in prices, the prices of 2007 appear to have squeezed out the most people for a very long time. The number of first time buyers actually dropped to its lowest figure since 1980 in 2007, with 300,000 making their way onto the ladder – that’s 15,000 less than in 2006. It was also found that the average house price was out of reach for first time buyers in 96 per cent of UK towns.

Despite the fairly disheartening figures for first time buyers, things look a little rosier for 2008. The final quarter of 2007 saw the biggest quarterly drop since the second quarter of 1995, when house prices were experiencing something of a slump before taking off. Martin Ellis, chief economist at the Halifax, noted that the mixed pattern of monthly price rises and falls in 2007 ‘is a typical characteristic of a subdued market.’ Judging from the sound state of the UK economy, Halifax predicts that house prices are expected to be flat during 2008.

There’s no such belief from David Kuo though, of the Motley Fool financial website. He predicts that prices could fall by up to 20 per cent during the year, so it could be important to wait and see what happens in the market. Coupled with this is the expected fall in the Bank of England’s base interest rate in the year to stimulate growth in the economy, as it moves into stormier waters following problems in the US.

Unfortunately, it seems that first time buyers are going to find getting their mortgage approved more difficult in 2008. Lending took a dive during the Autumn of 2007, down 12 per cent from August to September, then in November approvals were 40 per cent lower than in the same month in the previous year. However, if interest rates do come down as they are expected to, then mortgage costs are likely to fall, so there is a plus side.

See below for some of the top mortgage deals for 2 year fixed rates available from high street lenders:

Lender	Product	Typical Initial Rate	Rate Thereafter	Minimum Deposit
Natwest	Mortgages	5.49%	7.69%	25%
Alliance and Leicester	Mortgages	5.73%	7.69%	5% (varies with price)
RBS	Mortgages	5.85%	7.69%	25%