Page last updated at 05:48 GMT, Thursday, 10 July 2008 06:48 UK

Tough times for first-time buyers

Houses for sale in Macclesfield
The availability of mortgages will remain subdued, lenders say

A first-time buyer couple on low incomes must save a year's worth of their take-home pay to buy their first home, say surveyors.

A couple in the bottom quarter of earners in the UK needs 27,738 to pay the up-front fees, says the Royal Institution of Chartered Surveyors.

Affordability has improved for those able to get onto the housing ladder, the group says.

But the credit crunch has made it more difficult to climb onto the first rung.

"Access to the housing market has deteriorated as the credit crunch has taken hold of the mortgage lender sector," said Rics' senior economist David Stubbs.

"With mortgage approvals declining, the picture does not look like improving in the latter part of 2008 and first-time buyers will find their path to home ownership increasingly blocked."

Mortgage costs

Mr Stubbs said that those able to find a bigger deposit would benefit from reduced mortgage repayments as a result.

But he added that rising fuel and food bills meant that household finances would still be stretched.

The Council of Mortgage Lenders said that in May the average first-time buyers mortgage stood at 113,500.

Rics estimates that a bottom-quarter earning couple would jointly earn 27,316 a year after taxes, which would all be needed for costs such as a deposit and fees on a first home.

This was much higher than the 21% of their income they would have needed to get on the property ladder in 1996.

London was the most difficult area to access the property market for low-income couples, followed by the south-east, east and south-west of England.

Scotland and the north-east and north-west of England were the most accessible.


Larger deposits and falling prices meant those low-income couples who did have a foothold were finding that affordability had improved in April to July this year.

They would have to spend 34.5% of their take-home pay on mortgage repayments, down from 37.2% during the first three months of the year and lower than the record high of 46.5% at the end of 1989.

The figures come as Woolwich - the mortgage arm of Barclays - cut some of its fixed-rate mortgage deals by up to 0.3%.

Broker John Charcol also unveiled a two-year tracker deal on high-value home loans with a record arrangement fee of up to 137,500.

Borrowers are being offered an interest rate 0.01% below the Bank of England base rate, available on mortgages of between 500,000 and 5m, but they will have to pay an arrangement fee of 2.75% of the amount being borrowed.

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