First-time buyers squeezed out

The number of UK first-time buyers has hit a new low this month as deposit rates for properties skyrocket.

In the wake of the financial crisis, many first time buyers have been deterred from buying property because they cannot afford the amount lenders are demanding for deposits. Banks have become increasingly rigid with their lending policies, which has prevented the majority of first time buyers from getting onto the property ladder.

Last week the Council of Mortgage Lenders (CML) announced figures which showed a significant decrease in the numbers of first time buyers: only 15,600 people have purchased a home for the first time. These statistics coincided with new data released by the CML which revealed that mortgage lending figures have also dwindled.

CML’s general director, Michael Coogan told BBC News: “Weakening consumer demand and ongoing funding restraints will dampen monthly lending figures for the rest of the year and into the first quarter of 2009.”

The demographic most affected by these changes will be young professionals whose salaries cannot accommodate the current high prices in housing. In many cases, these individuals have just graduated and often have no substantial savings to use towards purchasing a property.

The current lack of credit has resulted in many of these first-time buyers turning to family members for financial aid in securing a house.

The CML have reacted to the claims by defending the policies of its members, who claim they cannot jeopardise their financial position by engaging in the kind of risk-laden lending that resulted in the current difficulties.

There may be relief for first time buyers in the form of decreasing house prices, but only if they intend to occupy the property for some time until house prices hit rock bottom and start to climb again.

However, many first time buyers who purchased their properties in the past couple of years have already found themselves in negative equity.