First-time buyers putting off purchasing

As 100 per cent mortgages dry up, an Equifax survey has revealed that 47 per cent of first-time buyers have delayed their plans to purchase.

A string of lenders have withdrawn 100 per cent mortgage products in the last few weeks.

And while it is widely accepted that lenders need to make responsible decisions regarding extending credit to those already carrying considerable levels of debt, the virtual elimination of the 100 per cent mortgage is making it almost impossible for first-time buyers to get on the property ladder.

In the latest survey by instant online credit information provider Equifax, 47 per cent of respondents said that the recent withdrawal of 125 per cent and 100 per cent mortgages has delayed their plans to purchase.

"The Bank of England interest rate cuts will be welcome news for home buyers, however as lenders continue to close the door on 100 per cent mortgages, first-time buyers don't have much room for celebration," explained Neil Munroe, External Affairs Director, Equifax.

"Our recent survey of consumers who have bought a copy of their credit report or credit rating revealed that 61 per cent of those without a mortgage plan to buy a property in the next 6-12 months, but many of those were banking on getting a 100 per cent mortgage".

According to the Equifax survey, 42 per cent of first-time buyers have less than a 5 per cent deposit to go towards a mortgage, with only 4 per cent having more than a 20 per cent deposit.

And, not surprisingly given the interest rate fluctuations over the last 18 months, 64 per cent of potential home buyers are hoping to be able to get a fixed rate deal in the next 6-12 months.

"Our survey reinforces the significance of fixed rate deals to offer peace of mind to borrowers" added Munroe.

"Indeed, with current economic uncertainty at the front of their minds, 91 per cent agreed with the recent budget announcement that more should be done to introduce more flexible and affordable long-term fixed rate mortgages for 10, 20 or even 25 years".

Of those not planning to buy a property in the next year, 28 per cent said it was because they can't afford the deposit, while 18 per cent believe they wouldn't be able to afford the monthly payments.

Interestingly, the Equifax survey also showed considerable consumer understanding of the recent tightening of lending criteria by banks and mortgage providers with 18 per cent thinking they wouldn't qualify for a mortgage and 13 per cent believing that they are already in too much debt.

"Last week's interest rate cut should go some way to helping home buyers find affordable mortgage deals - as long as lenders pass the cut on," concluded Munroe.

"Even for those first-time buyers that have the necessary deposit, good deals are going to be hard to find, but the lower rates should ease the pressure in the market a little.

"It looks like a tough year ahead for those looking to enter the property market for the first time, but by keeping a close eye on their finances and shopping around they should still be able to get a foot on the property ladder".

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