Mortgage blog: New rules cut the number of people who can afford their first home

Posted 23 September 2014

If you’re thinking of buying your first home then changes to mortgage rules introduced this year have made it much less likely that you can afford to get onto the property ladder. That’s the result of new research which has found that changes to underwriting criteria have resulted in a sharp cut to the number of people able to afford their first property.

There are now nearly two million first-time buyers who are now unable to afford a property, a sharp rise since 2007.

Mortgage rules ‘a key factor’ in the declining rates of homeownership

A new report from mortgage insurer Genworth has found that the number of first-time buyers unable to purchase homes has reached 1.8million since 2007. The research found that the limits placed on high loan-to-value mortgages were a key factor in the declining rates of homeownership. The insurer also found that these mortgage changes were hitting the 25- to 34-year-old age group the hardest.

Genworth warned that the potential withdrawal of the government’s Help to Buy scheme would cause the number of new properties to fall and that this would result in an even bigger gap between demand for homes and the supply. Even if the Help to Buy were to remain, the report said that first-time buyer numbers in 2014 would fall 41% short.

Simon Crone, Genworth European vice-president for mortgage insurance, said the crisis concerned both lending to first-time buyers and low rates of house building. Help to Buy, he said, “remains a temporary fix to a problem currently hard-wired into the market. But we must avoid its removal until there is a long-term solution in place.”

Help to Buy scheme supporting first-time buyers

The report flies in the face of recent figures which show that loans to first-time buyers rose in the second quarter of 2014. Council of Mortgage Lenders data showed that mortgages to first-time buyers totalled £3bn between April and June 2014, up 17% on the same period in 2013.

Keith Osborne, editor of whathouse.com, says: “The lack of availability of low-deposit mortgages has certainly made it more difficult for first-time buyers to get onto the housing ladder. However, there have been encouraging signs in recent months. The choice of high loan-to-value mortgages has increased and lenders are increasingly getting to grips with the new mortgage rules and their underwriting processes.

“It’s still tough for first-time buyers but with schemes such as Help to Buy available the future looks bright.”

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