With salaries set to increase beyond inflation this spring, it will be reassuring news for many first-time buyers, who are now facing having to take out mortgages of 3.31 times their salary to be able to afford a property according to figures from the Council of Mortgage Lenders (CML) figures. The proportion of income being spent on mortgage repayments as a percentage of gross earnings is now at 17.9%.
The danger for many of these buyers, especially in light of the recent interest rate rises, is that they may end up overstretching themselves. With only 41% of mortgages taken out last year on properties falling below the stamp duty level of £125,000 it means many first-time buyers are now facing increasing affordability issues in financing a property purchase.
For those who can not rely on their salary to be able to afford a property, the Homebuyer Show survey also revealed that buying with a partner was the second most common way to get on the ladder, jointly followed by help from parents and then taking out a 100% mortgage.
Dianne Sheerin, sales manager at Bryant Homes exhibiting at the Homebuyer Show, said: “Developers are offering lots of different packages for first-time buyers; the best advice is to speak to the sales negotiator and explain what you need to be able to buy a property.
“I would encourage anybody wanting to buy a property to find out how much they can borrow and what they are comfortable paying back each month. Once they have established this they will know how much they have to play with and can start a serious search.”
The government is also offering aid to first-time buyers, especially those classed as key workers, through its First Time Buyers’ Initiative (FTBI). The scheme allows eligible first-time buyers to purchase a minimum 50 per cent share in a new house, with the government making up the remainder.
Around 50 per cent of the new homes which are part of the FTBI will be for key workers such as nurses, police officers and teachers. The remaining homes will be made available to local residents who meet priority criteria identified by Regional Housing Boards.
Nick Clark, managing director of Homebuyer Events, commented: “Help is available for first-time buyers, especially from new homes developers and for key workers to enable them to take that first step on to the ladder. However, with interest rates climbing already this year, first-time buyers are now feeling the affordability squeeze.
“Buyers need to make sure they cherry pick their areas to ensure they are choosing properties which are going to give them the most appreciation in terms of house price rises. Although many areas have already experienced huge price increases in the last few years there are still opportunities for buying where prices are continuing to rise.”
