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Sancho Panza

Two Million First-Time Buyers Frozen Out Of Home Ownership

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Telegraph 31/8/14

'Almost two million first-time buyers have been blocked from owning their own home since the financial crisis struck, startling new figures show.

Research by Genworth, a mortgage insurer, found the lack of mortgages for borrowers with a small deposit, coupled with the high rates charged on such deals, has excluded 1.8 million from home ownership since 2007.

While the availability of small deposit loans has improved over the last year due to the Government’s Help to Buy scheme, the cost remains prohibitive.

A mortgage applicant with a 5pc deposit would need on average to have £21,000 more annual income than a buyer who could put down 25pc, the research found – even with the Help to Buy deals currently offered.

Ashley Seager, co-founder of the Intergenerational Foundation, which lobbies for a fairer distribution of wealth across the generations, said the findings illustrate just how out of reach a first home has become to many young people. "It is significantly harder for today's first-time buyers to get on the property ladder than it was for their parents or grandparents."

Genworth said when compared to previous generations, there were 1.8 million fewer first-time buyers between 2007 and 2013 than would be expected.

It said this figure is likely to pass the two million mark by the end of this year, despite the Government’s attempts to boost first-time buyer numbers through Help to Buy. The scheme allows borrowers with a 5pc deposit to secure a mortgage, but the number of first-time buyers is still far below pre-crisis levels.

Genworth said that while many lenders now offer mortgages for borrowers with a 5pc or 10pc deposit, the cost remains too high compared with historic norms.

Between 2008 and 2013, lenders stopped offering loans to borrowers with a deposit of less than 10pc because this type of borrowing was deemed too risky. When they reintroduced these loans last year, the cost soared.

Pricing differential for a two-year fix

Price_diff_3020785c.jpg

Genworth said for the average first time buyer home worth £147,000, a borrower with a 25pc deposit would pay £496 in monthly repayments, while a borrower with a 5pc deposit would pay £843.

Assuming both pay up to 30pc of their net income on their mortgage, Genworth said the former would need a gross salary of just £24,800 while the latter would need £45,800 to support the repayments.

It said this has caused lending to first-time buyers, which averaged 40pc of all mortgage lending until the mid-1980s, to fall to less than 10pc by 2008.

Expected and actual first-time buyer numbers

First-time_buyers_3020700c.jpg

Help to Buy and other Government schemes such as Funding for Lending, which made cheap wholesale funding available to mortgage lenders, have made some headway. The proportion of first-time buyers has now risen to around 20pc.

Figures released this month by the Council of Mortgage Lenders (CML) showed that 28,600 loans were advanced to first-time buyers in June – the highest number since December 2007. This was up 18.7pc since the same time last year.

However there are fears that when Help to Buy ends, which under current plans will be 2020 at the latest, lenders will retreat from the first-time buyer market.

Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said there is a danger that the resurgence could be short-lived.

“The mortgage market is making solid progress in recovery, but we’re still some way off normality,” he said. “Temporary injections like Help to Buy are needed to counterbalance the stricter lending landscape, but safeguards must be put in place to ensure we don’t become reliant on short-term treatments. Otherwise the market, and particular the first time buyer segment, will get a harsh dose of reality when the rug is pulled from beneath it.”'

I'm relieved that nearly 2 million people have been kept out of crippling debt.

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I'm relieved that nearly 2 million people have been kept out of crippling debt.

So where are they instead? Paying high rents for insecure and frequently low quality private rentals or living in stasis in their childhood bedrooms. Not exactly a win for Generation Y.

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Next generation lining up too

Yep. It's quite amazing how well the UK's political system has been able to keep ignoring the country's housing problems with apparently no consequences for itself. How many millions need to be locked out of stable housing for life before something breaks? 5 million? 10 million? 20?

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Speaking to someone yesterday they said...our children wont be moving out as they wont be able to buy a house.....I don't push for the logical conclusion to that statement but it seems people are starting to realise.

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I'm relieved that nearly 2 million people have been kept out of crippling debt.

Kept out of? Yep; near enough everyone would buy at any price, if they can only get the debt, pushing and falling over one another with offers offer - well mobfant and his associates - with their own market decisions. Not everyone wins with markets - which many on hpc have big hangups about... awarding victim status to eager willing buyers at mad prices, outbidding others for years and decades.

Except for those of us who refuse to meet ponzi asking prices, chose not to buy, who have saved, who have seen markets bailed out by global QE + reflated again.... but now can see demand falling away at crazy prices. Just about all mobfant's friends pulled into the market now. Bankers pushing 40 year mortgages not going to bring in the demand necessary to prop it up.

While the scale of the prices rises have been insane, it's not surprising that real London prices have risen by far more than inflation. The increase in demand (through international immigration and national, safest/most secure investment), shortage of supply, and the fact that London is arguably THE world city, and - for all its issues - a far far better place to live than it was in the 1990s. Hence if they fall, they won't fall back to where they *should* be.

I think there's a lot of truth to what you say, and I agree that people should recognise the risks and consequences of their actions.

It's often not a case that people aren't prepared to pay a certain price, but just that they can't afford - but would if they could.

Rightmove Index June 2014

Shipside notes: “Many serious buyers who were waiting in the wings have now bought and moved in, taking a slug out of the pent-up demand for a few years to come, and the consequent chatter on the street is that quality buyers are now thinner on the ground. The next wave of buyers may have less motivation or ability to buy and sellers are going to have to be sensitive to their local market and not pitch their asking prices too high as choosy buyers will not arrange to come and visit.”

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Can't these selfish people save more so I can be richer?

So it's mortgage costs to blame and not house prices. You learn something new everyday.

Sad thing is these little rich kids who get a job as a financial journalist through connections genuinely believe this.

Crikey i google her and she worked on some Surfers magazine and a few tittle bits in a "Lifestyle Magazine" ... before following the Ozzy backpacker trail to London.

http://www.moneymarketing.co.uk/nicole-blackmore/129.bio

The Daily Telegraph is an utter joke of a publication nowadays, i really must stop clicking on its webpage.

Edit she was a bleeding proof reader!

http://uk.linkedin.com/pub/nicole-blackmore/77/a16/31

And she cant be much older then 27.

Edited by Corruption

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So where are they instead? Paying high rents for insecure and frequently low quality private rentals or living in stasis in their childhood bedrooms. Not exactly a win for Generation Y.

Agree.

The broken banking system is preventing the normal functioning of the housing market.

Deposits only exist to satisfy the banking system. They serve no other useful purpose.

Credit should cost the same for any size of deposit - failed banking system needs junking.

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So where are they instead? Paying high rents for insecure and frequently low quality private rentals or living in stasis in their childhood bedrooms. Not exactly a win for Generation Y.

yep - i was trying to buy a flat htis year - it fell through and lost my job.

37 still at home.

flipping depressing.

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Yep. It's quite amazing how well the UK's political system has been able to keep ignoring the country's housing problems with apparently no consequences for itself. How many millions need to be locked out of stable housing for life before something breaks? 5 million? 10 million? 20?

Using logic, in this case the logic that the government is looking after you, then it must be for your own good. dont you know, stay at home and be a traditional family as per 200 years ago.

Speaking to someone yesterday they said...our children wont be moving out as they wont be able to buy a house.....I don't push for the logical conclusion to that statement but it seems people are starting to realise.

Yes, recently had argument with my Gen X BrotherInLaw re how happy he is re house prices going up. He is as proud as punch re his house choosing and buying prowess and how its enhanced his and his families life with cars, boats and holidays for the last decade or so. MEW in a big way that is, the argument with me is that this increase in equity is seen by him as 'his' money for spending, my argument is that this spending money is just another loan.

His oldest live at home is now 26 years old and will be there for ever due to a lack of full time jobs that pay, big degree and all. Daddy does not understand that boy will be at home for at least another decade and only then if boy gets very lucky. (and no you dont make much of this luck yourself, not when the 'C;s' are actively working against you. ie the govt, bankers, employers etc etc.)

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yep - i was trying to buy a flat htis year - it fell through and lost my job.

37 still at home.

flipping depressing.

Sorry to hear that. At least you didn't get the flat and then lose your job. A small mercy perhaps?

Edited by Maynardgravy

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Agree.

The broken banking system is preventing the normal functioning of the housing market.

Deposits only exist to satisfy the banking system. They serve no other useful purpose.

Credit should cost the same for any size of deposit - failed banking system needs junking.

The banking system is not broken, it is bent, dysfuncitonal and malignant. It is parasitic and seems to have similar minded bedfellows in governtment.

£10K could build/buy decent shelter for a singleton, static caravans, caravans, mini houses, all sorts could provide temporary accommodation that is more secure than rentals. The government, the banking system and the cartel housebuilders will do everything they can to prevent this from happening.

Edited by onlyme2

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Sorry to hear that. At least you didn't get the flat and then lose your job. A small mercy perhaps?

yes - can you imagine the stress of trying to rent out a flat whilst having no job.

i have learnt this yera that nothing is guaranteed in life and you dont always get what you want.

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