First-time buyers need to save more than the national average annual wage to be able to get a foot on the housing ladder, the Council of Mortgage Lenders (CML) has said.
At the start of 2007, a typical mortgage required a deposit of £12,700 which rocketed to £31,500 by the second half of 2010. The average age of a first-time buyer has been pushed up to 37 as a consequence according to government estimates.
The figures were released as housing minister Grant Shapps summoned various parties to discussions on the difficulties facing first-time buyers.
Michael Coogan, director-general of the Council of Mortgage Lenders, warned that there is no “magic bullet” that will immediately remove the hurdles faced by frustrated tenants looking to buy their first home. He told the First-Time Buyers summit that returning to a normal mortgage market was likely to be a slow process, as confidence gradually returns to the lending markets.
The government estimates that some 1.4 million households are keen to buy their own home but are unable to secure the necessary funding because of the mortgage freeze.
Mr Shapps said that he wanted members of the industry to talk between themselves to establish new products and ideas to get the market moving but stressed that he didn’t want to see a return to the reckless lending patterns witnessed before the financial crisis.
“I do not want to see the current generation completely locked out of the market. The pendulum has swung too far the other way, where even if you have a good salary and save to get a deposit, you still cannot get a mortgage,” he said.
“We want to do more to help aspiring first-time buyers – the average age of the first-time buyer with no support from their family is now 37, and there are 1.4 million households who aspire to own a home but are simply unable to do so because of house prices and mortgage availability.”
Mr Coogan said: “First-time buyer numbers will only recover slowly over time, and may take several years to approach the annual rate of 400,000 to 500,000 purchases that we have seen historically.
“A range of initiatives – including shared ownership, product innovation and mortgage insurance – could all potentially play a part, but none is likely to be a magic bullet that restores normality to the mortgage market, for first-time buyers or anyone else. This is likely to be a gradual process as confidence in funding markets and lending decisions is restored.”
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