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First time buyers face deposit challenge

First time buyers face deposit challenge

Category: Mortgages

Updated: 13/09/2010
First Published: 13/09/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

First time buyers are having to find ever greater deposits in order to secure their first home, new research has revealed.

Despite easing during the early part of the year, loan criteria tightened slightly during July, according to the Council of Mortgage Lenders (CML).

As a result, first time buyers had to put down average deposits of 24% in the month, a figure unchanged from that reported in June, but up from the recent trough of 21% seen in April and May.

However, with interest rates remaining low, interest payments continued to take up a relatively modest share of first time buyer income.

At 13.2%, this was down slightly from the previous month and the lowest it has been since early 2004.

Like first time buyers, home movers saw their average deposits rise again, from 33% in June to 35% in July.

However, their interest payments as a percentage of income also held steady, at 9.6%, still the lowest share seen since the early 1970s.

Meanwhile, the amount of mortgage loans approved for first time buyers dropped during the month to 19,400, down from 19,700 in June and from 20,100 in July last year.

First time buyers' share of the mortgage market was at 34% in July, the lowest proportion seen since before the credit crunch began in August 2007.

"More generally, lending criteria remains tight, underpinned by caution on the part of both borrowers and lenders in the light of continuing economic uncertainty," said CML economist Paul Samter.

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