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Number of first-time buyers in the capital falls to all-time low
Mira Bar-Hillel21 Apr 2008
The number of first-time buyers in London has fallen to an all-time low.
Just 13 per cent of mortgages in January went to first-time buyers, compared to 19 per cent last year and 37 per cent in January 1997.
Experts blame the decline on spiralling prices and the credit crunch, which has led to the disappearance of 100 per cent mortgages and increased loan costs.
Information systems company CACI also found that the average first-time buyer would need a deposit of £50,000 to take advantage of the best mortage rates.
Its research reveals the average firsttime buyer mortgage in London is £200,000, which would require a salary of about £60,000 and a 10 per cent deposit of £20,000.
But as credit conditions tighten, buyers looking for the best rates would need a deposit of at least 25 per cent.
Philip Machin, of CACI, said: "It is clear that the current economic climate is having a serious effect."
The crisis comes as Chancellor Alistair Darling prepares to meet major mortgage lenders to insist they pass on recent interest rate cuts to customers.
He will tomorrow ask them to allow homeowners who are struggling to take payment "holidays" rather than simply beginning repossession proceedings.
Howard Archer of Global Insight said: "This fall indicates just how difficult it is for first time buyers in London. They are being priced out and pressure from lenders is still mounting."
Ed Stansfield, property analyst at the Capital Economics consultancy, added: "The withdrawal of mortgages based on five times salary or more, or 100 per cent of the purchase price, will reduce demand further."
But he said the decline should not be a surprise. "Property prices have risen to ridiculous levels. Even before the crunch fewer and fewer borrowers were able to step onto the ladder."
Last week housing charity Shelter warned house prices for first-time buyers have trebled during the past decade, with London hit worst.
"On average, first homes in London cost 4.3 times the buyers' income, compared to 1.98 times in 1997," it said.
"Even recent news that prices are falling will bring little comfort to firsttime buyers as any savings are being negated by higher mortgage costs."
The plight of first time buyers is being exacerbated by the rise of buytolet investors. Research by ratings agency Fitch Ratings found that in parts of east London - including Canary Wharf - over 28 per cent of mortgages in 2007 were to investors, not occupiers.
In Uxbridge in the north-west, landlords-took almost one in five mortgages. Helen Frostick, 28, has been renting in London for 10 years. In a desperate effort to improve her income in order to buy her first home she gave up a career in nursing to work in public relations.
She now earns £25,000 a year, but has found that is still not enough to buy a home in west London.
She said. " I'd like to invest in a property, but it is impossible. I recently viewed a one-bedroom flat in Parsons Green. It was tiny and the kitchen smelt of mould. Yet it cost £265,000.
"I will be renting for the foreseeable future, in the hope that prices come down sufficiently for me to able to afford something habitable."
• The number of people shopping in the West End is increasing strongly despite the credit crunch, figures show today.
Data released by the New West End Company shows the number of people shopping in central London last month was four per cent higher than for March last year, mainly thanks to spending by wealthy foreign visitors. Nationally, footfall was down more than eight per cent in the same period, according to research for footfall data firm Springboard.
Reader views (1)
HIPS report anyone?
- Jacqueline, Hampstead, London, 21/04/2008 20:28
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