Over a third of potential buyers are trapped in rented accommodation as they cannot afford to access the property market, with many seeing their purchases fall through due to difficulties with mortgage finance.
38 percent of potential first time buyers are forced to continue renting as they simply cannot afford to get a foot on the property ladder, according to chartered surveyors across the UK.
Furthermore, almost twenty percent of those who do try and take the plunge are seeing their dreams of home ownership shattered as problems accessing adequate mortgage finance are causing their deals to fall through.
The large deposits required by many lenders coupled with steadily increasing rents across much of the country mean that those who cannot rely on the ‘bank of mum and dad’ to raise a deposit are struggling to generate the funds that many banks require.
The government recently introduced its NewBuy scheme which is designed to assist first time buyers by encouraging lenders to offer 95 percent mortgages. However, as this is only available for newly built properties, the vast majority of homes in the UK remain unaffordable and inaccessible for many.
RICS would like the government to consider a similar scheme for second hand properties, lending or guaranteeing first time buyers a reasonable deposit in return for a stake in the home. This would provide the government and the taxpayer with a clear return on investment, allow first time buyers to access the market and free up stagnant chains. Whilst there are a number of schemes being considered by local authorities and private funders, this is fragmented at present and lacks the volume to significantly improve the number of buyers needed to stimulate market activity.
Peter Bolton King, RICS Global Residential Director, commented:
“Many first time buyers are facing the prospect of a property ladder with no rungs. With lenders requiring such hefty deposits and affordable mortgage deals out of reach for most, a generation of potential homeowners are facing an uphill struggle. Without allowing more first time buyers to enter the market, chains will continue to stall and transaction levels will stagnate.
“RICS would like the government to consider a mortgage indemnity scheme that works for the whole market, not just new build. NewBuy could potentially lead to market distortion by reducing demand for second hand property. Without allowing first time buyers greater access to the second hand market, chains and transaction levels will continue to stagnate.”
