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Thousands of First-Time Buyers Trapped

by Alison Feemantle

If you bought your first property at the peak of the market you might be feeling a little trapped by the unstable situation right now.  Falling house prices have trapped upwards of 350,000 first-time buyers and that figure looks to be rising.

Many young people buying their first property have experienced on average £11,000 stripped from the value of their homes since 2007.  The report released by HSBC also reports many first-time buyers finding themselves in negative equity.  Others are finding it hard or impossible to move to their second bigger home due to the volatile housing market and the high costs involved in moving home.

HSBC reported that first-time buyers in Northern Ireland have been the worst hit by falling house prices.  Those who bought during 2007 could be facing a 42% decrease in their property value totalling a negative equity of £45,000.

London seems to be the only region where the house prices for first-time buyers has shown an increase since 2007.  However, despite having equity of £48,000 in their first properties, second-time buyers are still facing problems when finding enough money to trade up to their next property.

But Matt Hutchinson, director of flat and house share website, said that even though house prices are falling, few are actually able to take advantage of this fact.  More people are waiting to see what happens with the market, choosing to rent, or trying to raise the cash for their deposit.

“It is a frustrating time for many prospective buyers because they are having the carrot of some very attractive mortgage rates dangled in front of them, but because they aren’t able to afford the sizeable deposits still demanded by lenders, homeownership continues to remain just out of reach,” he said.

“If you add into the mix that demand for rented properties at the moment is driving rental costs higher and higher, forcing first-time buyers to dip into their deposit funds to pay rising living costs, then taking that first leap on to the property ladder seems a distant and forlorn dream.”

Howard Archer, chief UK economist at IHS Global Insight, agreed: “There still seems to be significant difficulties in getting a mortgage for many people, notably including the need to raise high deposits, particularly for first-time buyers. And there is significant concern that banks’ future ability to lend to homebuyers could be hit by difficult wholesale funding conditions.”

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