Many first time buyers taking a ‘wait and see’ stance

Over the past couple of years things have been extremely difficult for first time buyers in the UK.

Firstly there were problems being able to raise the money needed to purchase a property, with house prices soaring in the UK requiring buyers to obtain larger mortgages.

For first time buyers there is not equity from a previous property to rely on, which means that they have to take out a loan for all or the majority of the value of the property they wish to purchase. In order to address this problem many lenders have started offering increased income multiples and longer repayment periods on mortgages for first time buyers.

However, there is now a fresh problem for first time buyers to consider. Rising interest rates mean that in addition to having to take out a huge mortgage in order to buy a property these buyers also have to deal with huge repayments because of the increased interest rates, which have shot up by 1.25% in the past year.

Even those starting out on fixed rate mortgages have to put up with a high fixed rate, and will therefore be stuck with this high rate for a fixed period even if interest rates start to fall again in the near future.

Rumours of house prices falling towards the end of the year, combined with predictions of further interest rate rises, has now seen many first time buyers take a step back, with many deciding to rent and wait it out to see what happens before rushing to get onto the property ladder in the current economic climate.

One first time buyer stated: “I am desperate to get onto the property ladder, because I feel that the chances of ever getting my own place are getting slimmer and slimmer. But with all of these rumours about decreasing house prices and rising interest rates I want to see what happens before I make any long term commitment.”

Tom Smith
6th October 2007

Tags: time, rise, Mortgages, rates, buyer, interest, bank