Mortgage loan
For first time buyers obtaining a mortgage loan to get a foothold in the property market is currently very problematic in the UK. House prices have climbed at a faster rate of inflation than the personal income / wages of buyers for several years now. Consequently, property prices have been stretched beyond the limits of affordability for first time buyers in many regions of the country.
This affordability problem is more acute in the South East of England and in London. Here, the average house prices are £173000 and £207,000 respectively. Yet, the average wage of a first time buyer looking for a mortgage loan is only £29,300. Even at four-times the loan applicant's salary, a single person would need a huge deposit on a mortgage to get anywhere near affording an 'average' home in London and the South East.
Adding to the woe of first time buyers looking for a mortgage are the current risks associated with the housing market as a whole. First time buyers who are lucky enough to be able to afford a mortgage loan are having to think long and hard about whether they really want to commit to such a big loan in the present economic climate. House prices it seems are close to reaching an inflationary peak, and with some 'experts' warning of an imminent house price crash, buying into a mortgage loan now could see first time buyers quickly head into negative equity should a crash on the scale of 1990 materialise.
It's not all bad news!
Thankfully, for first time buyers looking for a mortgage loan it's not all doom and gloom. In March 2005 Gordon Brown announced an increase in the threshold of stamp duty on property purchases. He doubled the threshold from its pre-budget level of £60,000 to a new level of £120,000. In some areas, this will alleviate the costs associated with buying property under £120,000, in theory lowering the total amount of home loan that a buyer will need to commit to.
Additionally, the UK home loan market is extremely competitive at the present time. There are currently more mortgage lenders vying for business than there were five years ago. Given that home loan applications in early 2005 fell to their lowest monthly level since mortgage completion records began in 1998, this greater number of mortgage lenders are now effectively competing for fewer customers.
The upshot of these factors is that home loan deals are actually great value for money at the moment, with mortgage lenders offering a number of fantastic mortgage incentives in the hope that they will attract people to take out their home loan with them. If you can afford to take on a home loan / mortgage, now is the time to get the best deal…that is if you're willing to take the associated risks!