Now house prices are seemingly falling, how does this effect first time buyers?

However, with banks and building societies now being much more diligent about what they are willing and able to lend, the fact that prices have fallen somewhat is offset by the fact that it is now much harder to borrow money than it has been for many years.

Not too long ago, I was commenting about how some lenders were willing to lend up to 6 times your annual salary. Today, I was able to find only two mortgages online willing to lend £200,000 with no deposit on a salary of £40,000 (i.e. 5 times annual salary). However, there were plenty of offers available when only wishing to borrow £160,000 (4 times salary) on a £200,000 property as the risk is seriously offset by a sizeable deposit. Reducing the property value to £160,000 and asking for a 100% mortgage on £40,000 per year produced a significantly shortened list, although it was still feasible to borrow money. The problem however, lies in the fact that the average salary in the UK is not £40,000, it is nearer £24,000 with average property prices approaching £200,000. A little bit of research on the internet shows that it is still possible to raise a mortgage on a property with a value of £200,000 with a deposit from £10,000 on a salary of £24,000, but this would mean monthly mortgage repayments of around £1200 which would have to come from a take home pay of around £1400 per month. All of this is assuming that that as a borrower you have no other commitments such as credit card bills or outstanding student loans, which seems unlikely given the demographics and spending behaviours of typical first time buyers. In fact, it seems that those on the housing market are more likely to find themselves in spiralling debt given these frightening figures than those who remain in the house share or flat share market.

So, does the recent slide in house prices help the first time buyer? Well, it’s probably a move in the right direction, but for most, it would seem that renting property represents the short to medium term future.