What happens when there are no FTBs?

Life just got that little bit tougher for the beleaguered first-time buyer. This week, mortgage lenders withdrew their loans of more than 100% of the property value. These were always a risky option, but for some they were the only way to afford an overpriced home. Now that credit on international money markets has dried up, many banks are beating a retreat from mortgages. Nationwide is insisting on a deposit of at least 25% if borrowers want access to its best rates.

All this is bad news for a fragile housing market, and particularly new-build flats aimed at younger buyers. And the market for these starter homes underpins prices for the rest of the housing stock.

Some sellers are already reducing prices for a quick sale and pundits are expecting a drop of 5% in house values this year. Owners further up the chain often delay a sale if they think prices will be low, so it can take years for the effect to filter through. In the last housing downturn, which began in 1989, prices took five years to bottom out. And the market would have to collapse to become affordable again for first-timers.

 

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