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First-time house buyers need help, says Grant Shapps First-time house buyers 'face big bill'
(40 minutes later)
Housing and lending bodies are facing government calls to lend to first-time buyers - but the UK's major lenders are not at Tuesday's summit. Many first-time buyers must save the equivalent of more than a year's salary to be able to afford a deposit for a home, the Council of Mortgage Lenders (CML) has said.
Housing minister Grant Shapps has summoned various parties to "frank and open" discussions on difficulties for first-time buyers. The typical deposit stood at £12,700 at the start of 2007, but rose to £31,500 by the second half of 2010.
The government estimates 1.4 million households want to own their own home, but face a mortgage squeeze. The figures were released as housing and lending bodies faced government calls to help first-time buyers.
However, the actual lenders themselves were not invited to the meeting.However, the actual lenders themselves were not invited to the meeting.
The Council of Mortgage Lenders (CML) and the Building Societies Association - which represent lenders - are attending the summit. Housing minister Grant Shapps summoned various parties to "frank and open" discussions on difficulties facing first-time buyers.
Mr Shapps is expected to use the meeting to call on banks to offer more help to first-time buyers, such as creating new products specifically aimed at helping people get on the property ladder. The government estimates 1.4 million households want to own their own home, but face a mortgage squeeze.
Difficulties Slow recovery
The CML said that the typical first-time buyer needed to pay a deposit equivalent to a year's income. Mr Shapps used the meeting to discuss options such as creating new products specifically aimed at helping people get on the property ladder, as well as shared ownership or specialist insurance for lenders.
The typical deposit stood at £12,700 at the start of 2007, but by the second half of 2010, this had increased to £31,500. The CML and the Building Societies Association - which represent lenders - attended the summit along with watchdogs and regulators.
Figures show a downward trend in first-time buyer numbers throughout 2010. Mr Shapps said that he wanted members of the industry talking between themselves, but not to return to reckless lending levels.
There was a sharp fall at the end of the year, according to the British Bankers' Association (BBA), although this was skewed by the rush to beat the end of the stamp duty holiday at the end of 2009. "I do not want to see the current generation completely locked out of the market," he said.
First-time buyers are regarded as crucial to any housing revival, but many have only been able to get onto the ladder with financial assistance from relatives. Some 84% of those aged under 30 required such assistance, the CML said. "The pendulum has swung too far the other way, where even if you have a good salary and save to get a deposit, you still cannot get a deposit.
The average deposit required when buying a property was 23% in December, according to the BBA, up from 21% the previous month. "We want to do more to help aspiring first-time buyers - the average age of the first-time buyer with no support from their family is now 37, and there are 1.4 million households who aspire to own a home but are simply unable to do so because of house prices and mortgage availability."
This has been partly the result of strict lending criteria from mortgage providers - including turning down potential borrowers with any blot on their credit history. However, the CML questioned the minister's figures, saying that the typical age of a first-time buyer who did not receive help from relatives was 31.
"We want to do more to help aspiring first-time buyers - the average age of the first-time buyer with no support from their family is now 37, and there are 1.4 million households who aspire to own a home but are simply unable to do so because of house prices and mortgage availability," Mr Shapps said.
"So I am calling together key figures from across industry to discuss how we can tackle this problem. This cannot be achieved simply by top-down diktats from government - there will need to be a unified effort and creative solutions from across the board to make sure we do not lock young people out of the housing market."
However, the CML questioned the minister's figures, saying that the typical age of a first-time buyer who does not receive help from relatives was 31.
The lenders' group said that funding problems for lenders and stricter regulations - which required lenders to hold more capital for lending to "riskier" borrowers - meant that things could not change quickly.The lenders' group said that funding problems for lenders and stricter regulations - which required lenders to hold more capital for lending to "riskier" borrowers - meant that things could not change quickly.
"First-time buyer numbers will only recover slowly over time, and may take several years to approach the annual rate of 400,000 to 500,000 purchases that we have seen historically," the CML said."First-time buyer numbers will only recover slowly over time, and may take several years to approach the annual rate of 400,000 to 500,000 purchases that we have seen historically," the CML said.
"A range of initiatives - including shared ownership, product innovation and mortgage insurance - could all potentially play a part, but none is likely to be a magic bullet that restores normality to the mortgage market, for first-time buyers or anyone else."A range of initiatives - including shared ownership, product innovation and mortgage insurance - could all potentially play a part, but none is likely to be a magic bullet that restores normality to the mortgage market, for first-time buyers or anyone else.
"This is likely to be a gradual process as confidence in funding markets and lending decisions is restored.""This is likely to be a gradual process as confidence in funding markets and lending decisions is restored."
The Building Societies Association told the minister that any new schemes needed to be run alongside a faster housebuilding programme.
'Help''Help'
Extra help cannot come soon enough for Nick and Marie Smith. They had been renting a home for four years, while saving for a deposit.Extra help cannot come soon enough for Nick and Marie Smith. They had been renting a home for four years, while saving for a deposit.
The couple, who have two young children, realised that to raise enough money they needed to move in with Mr Smith's mother in Wiltshire.The couple, who have two young children, realised that to raise enough money they needed to move in with Mr Smith's mother in Wiltshire.
"It cannot be for ever. I would be nice to be together in our own home," said Mrs Smith."It cannot be for ever. I would be nice to be together in our own home," said Mrs Smith.
They were keen for Mr Shapps to demand that lenders loosen their lending criteria.They were keen for Mr Shapps to demand that lenders loosen their lending criteria.
"They have got to do something about this level of deposit. It is just ridiculous. Nobody can save that level of deposit," Mr Smith, 32, said."They have got to do something about this level of deposit. It is just ridiculous. Nobody can save that level of deposit," Mr Smith, 32, said.
"It does not just affect first-time buyers, it affects everyone up the chain. He [Mr Shapps] really needs to get something going and improve their lending."It does not just affect first-time buyers, it affects everyone up the chain. He [Mr Shapps] really needs to get something going and improve their lending.
"The banks should be working for us, not the other way around.""The banks should be working for us, not the other way around."
Separate research from housing website Rightmove found that 23% of people who planned to buy a property in the coming year would be first-time buyers.Separate research from housing website Rightmove found that 23% of people who planned to buy a property in the coming year would be first-time buyers.
Generally, it is thought that double this proportion of first-time buyers is a sign of a healthy housing market.Generally, it is thought that double this proportion of first-time buyers is a sign of a healthy housing market.
Trends
Figures show a downward trend in first-time buyer numbers throughout 2010.
There was a sharp fall at the end of the year, according to the British Bankers' Association (BBA), although this was skewed by the rush to beat the end of the stamp duty holiday at the end of 2009.
First-time buyers are regarded as crucial to any housing revival, but many have only been able to get onto the ladder with financial assistance from relatives. Some 84% of those aged under 30 required such assistance, the CML said.
The average deposit required when buying a property was 23% in December, according to the BBA, up from 21% the previous month.
This has been partly the result of strict lending criteria from mortgage providers - including turning down potential borrowers with any blot on their credit history.


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    • As a first time buyer currently looking for a house, and having recently put in an offer for a nice 4 bedroom detached with nice garden, garage, and only a few years old I'm not convinced there is too much of a problem. We were accepted for a mortgage straight awayI can only presume it is those who have got themselves a bad credit history, or wishing to live above their means who are struggling. This comment is awaiting moderation. href="http://www.bbc.co.uk/blogs/moderation.shtml#appear" target="_blank">Explain.
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    • I agree. House prices are currently far too high. When interest rates return to normal, and even after the deposit is found, it will still require two full time salaries to meet mortgage repayments, along with the other costs of running a home. That leaves little contingency for future personal and national economic shocks; which are inevitable during the lifetime of a mortgage. This comment is awaiting moderation. href="http://www.bbc.co.uk/blogs/moderation.shtml#appear" target="_blank">Explain.
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    • Me and the missus are both earning under 18k, bought first property during the recession. To get on the ladder we decided on three things:- 1. We weren't going to have a kids 2. We wouldn't drive a car. 3. Don't put money in pension! once on the ladder and you see your earnings rise then consider the other 3 e.g my mate and his missus just had both cars fixed at a price of £900, affordable? NO. This comment is awaiting moderation. href="http://www.bbc.co.uk/blogs/moderation.shtml#appear" target="_blank">Explain.
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    • Unfortunately the ruling elite are heavily invested in property and will not allow prices to decline sharply. That means they'll support measures to limit house building to keep demand high, they'll support measures to limit tenants rights and they'll encourage lending silly multiples of income to people who have become desperate to buy rather than pay someone else's mortgage. This comment is awaiting moderation. href="http://www.bbc.co.uk/blogs/moderation.shtml#appear" target="_blank">Explain.
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