Amid home owner concerns and reports of reposessions, things are finally looking up for the first time buyer.
Despite reports of a stagnating property market, things may be starting to look up for those wanting to purchase their first property in 2008. A combination of waning house prices coupled with twice reduced base rates could mean that this is the year of the first time buyer.
Evidence of a stalling market is clear with both the Council of Mortgage Lenders and Department for Communities and Local Government reporting figures that are set to send shivers down any estate agents spine.
The CML reported that the number of mortgages approved in December was down an astounding 35% on the previous year with only 62,000 home loans given the go ahead. The number of home owners looking to remortgage to a better deal was also down in December despite the rate cut. Only 59,000 re-financing loans were approved in the final month of the year, a figure that took remortgage rates to their lowest in 6 years.
Figures from the DCLG show a similar pattern with house price inflation falling for the second month in a row during December.
While, according to the CML, housing affordability for first time buyers deteriorated in 2007 due to a combination of ever increasing property prices and rising rates that saw first timers shelling out a massive 20.7% of their income on interest payments alone, the market cool down that we’re currently seeing in combination with the recent reduction in base rates could provide them with the perfect opportunity to make their move.
Michael Coogan, Director General of the CML commented: “For first-time buyers, the combination of subdued house price inflation and lower mortgage rates means affordability should ease slowly as the year progresses".
The government are also expected to play their part by raising the threshold for stamp duty eligible properties to reflect the recent rise in house prices. The valuation limit above which stamp duty must be paid currently sits at £125,000 and over 50% of first time buyers had to pay out for this extra cost in 2007.
As stamp duty adds a significant amount to the initial cost of buying a home, a threshold increase would definitely make buying a more realistic option for many first timers. However, as the average purchase price of a first property is currently just under £167,000 to make an impact, the increase will have to be a big one.
