First time buyers to get some help.

Recent comments on the housing market have noted that the age of the average 1st buyer is in their late 30’s and perhaps even their early 40’s. It is worth taking that with a pinch of salt given that somebody in their 30’s a or 40’s lived through the last decade when mortgages were easily available.

However it should be recognised that the lot of a first time buyer is not easy now. The size of deposit required and the availability of mortgages has reduced the number of first time buyers getting onto the housing ladder.

The government is worried. Should it be?

The level of activity amongst buy-to-let investors is still high and the level of rents is of course bouyant. So maybe the houses are being purchased, just not by first time buyers. Is the market correcting to more reasonable house values? Wouldn't it help first time buyer more if prices were 20% lower?

The housing market hasn’t crashed substantially and whilst not growing appears to be bouncing along sideways. Interest rates at 0.5% of course help this. So first time buyers are being hit by house prices that remain high in relation to earnings and a need for large deposits.

I guess the government, house builders and banks don't want the price of houses to fall. I would have thought first time buyers would welcome it greatly. It is therefore ironic that the governments worries about the housing market have prompted them to help the very people who want the house prices to fall.

So how is the Government going to help First Time Buyers.

The older readers among you may remember Mortgage Indemnity Guarantees (MIG). These insurance policies were paid by borrowers where the loan to value was high. They protected the lender in case the borrower defaulted on the mortgage.

Well, in essence we have the return of the (MIG). This time it wont be paid for by the borrower but it still protects the lender from default on mortgages where the loan to value is high. The protection is only for the top portion of the loan with the borrower still liable for the bulk of the mortgage. In a nutshell this all boils down to less deposit for the first time buyer to find.

The first time buyer will have to purchase a new build property, which will stimulate the sale of newly developed homes. Good for the builders, good for first time buyers and good for the general housing market.

That all sounds like good news, and we welcome anything that makes it easier to arrange a mortgage for our clients. 

But be wary. Whilst interest rates are low, a house may be affordable and the government may help to get first time buyers onto the housing ladder, by removing some of the risk for the bank. 

However the first time buyer still carries a mortgage that they must be able to afford, as well as their life cover and sensibly some protection against unemployment. House prices won’t be racing away from first time buyers so there is no urgency to jump on the property ladder. There may even be the chance to buy at a better rate in a years time! So are first time buyers being helped?

The new initiative makes it easier to get that first mortgage, but as always find the right house at the right price and at a level that can be afforded. If the deal is right then lets get cracking and lets get that mortgage approved.