Date Published 12 November 2012
First-time buyers will make up 25% of prospective buyers next year – well short of the 40% level seen pre-credit crunch.
Rightmove says that 22% of first-time buyers expect to have a deposit of less than 10%.
The site said its research showed a growing list of challenges for first-time buyers trying to get on to the property ladder, with three in ten saying their biggest single concern is finding a suitable property to buy.
Rightmove says the lack of suitable first-time buyer property is caused by the number of ‘second steppers’ who cannot afford to move on. Around one in five (18%) of second-steppers say they are in negative equity and therefore reluctant or unable to come to the market.
The supply of suitable first-time buyer properties is down 5% compared with this time last year.
Rightmove director Miles Shipside said: `That the travails of today’s second-steppers can negatively impact tomorrow’s first-time buyers is a great example of how interconnected the housing market is.`
Apart from being able to raise a sufficient deposit, and finding a suitable property to buy, first-time buyers said they were also concerned about personal financial security, meeting monthly mortgage repayments, and fluctations in house prices.
Rightmove’s research was based on responses from 16,627 potential buyers.
Meanwhile, research by Castle Trust shows that six out of ten mortgage applications rejected in the last five years were from first-time buyers.
Altogether, a total of 1.57m mortgage applications – worth an average of £144,600 each or collectively £227bn – have been turned down.
This was despite the average deposit being around 20%, while 794,000 of those turned down had deposits or equity of more than 20%.
The research by Castle Trust among applicants found that 60% of people rejected for a mortgage were – or would have been – first-time buyers; a further 22% were home movers and 11% were remortgagers.
Of the remainder, 3% wanted to increase their mortgage and 4% wanted a mortgage for other reasons.
Castle Trust warned that it could become harder to secure a mortgage in future because banks will have to hold more in capital reserves.
Separate research showed that 71% of advisers believe the amount banks will be willing to lend will be lower than historic levels. Furthermore, 72% anticipate that mortgage rates will increase over the next five years.
Castle Trust last month launched a new type of mortgage called Partnership Mortgages. These are for 20% of the value of an owner-occupied home alongside a repayment mortgage of up to 60% from a traditional lender and a deposit of at least 20%.
When the borrower sells, Castle Trust takes a share in the property’s rise in value – or takes a hit on the loss.
If the property has risen in value, Castle Trust will want back its original loan plus a 40% share of the rise in value.
If the home has lost value, Castle Trust will want its original loan back minus 20% of any fall in value.
Borrowers using Castle Trust’s proposition will do better in a falling market, but clearly Castle Trust needs a rising market to succeed.
Castle Trust is financing the proposition through savers who invest in ‘HouSAs’, where house prices are linked to the Halifax House Price Index.
The company has not yet revealed how its offering is faring, although there have been rumours that first-charge lenders have so far failed to be impressed.