CR+ Blog

"I recently read in the Money Marketing, a financial weekly paper that the Government apparently believes that the current housing prices are too high and that they may even welcome a drop in the value of our homes!  I doubt many will be particularly pleased to hear this claim but apparently there is method in the madness.

Changes to mortgage regulation are afoot concerning assessing a customer's affordability for a mortgage.  Most experts believe this will see Lenders becoming more stringent than ever with their lending criteria which could lead to many customers - who would usually find a mortgage without a problem - struggling to get one. And if things were not already tough enough, particularly for the first-time buyers, the relatively low loans being offered by Lenders in comparison to the value of the property are apparently seeing initial deposits required of £36,500 on average (according to BBC news)!

So would a dip in house prices be enough for them to get onto the property ladder?  I do not know so many young people who have £36,500 in savings!  Any drop in this average deposit requirement would need to see a proportionate drop in house prices and with the most pessimistic estimates suggesting an albeit concerning 25% drop may be on the cards this would still leave our first time buyers needing to fork out £27,375 for a deposit!

This leaves us with 2 solutions.  The easiest for the first time buyer would be for the Lenders to increase their loans in comparison to the value of the house (75% up to 90% for example) which for the right customer would surely not cause too much of a risk to the Lender. However, with this solution not expected on the horizon just yet we have to look at solution number 2, saving.  Now to our parent's generation, this word meant everything. With working-class parents myself I knew that this is what happened to every spare penny my Mother and Father ever earned.  However, in the last decade the word ‘saving' seems to have become a forgotten process which has been replaced by the much less challenging task of obtaining ‘credit' for purchasing items.  The lack of savings-focus in the country has become a well publicised concern for the Government but any solution to this problem will not happen overnight.

It seems fair to say that a combination of these 2 solutions would be the best way forward for prospective buyers and would clearly lead to an upturn in activity on the housing market. As customers we can only control the savings side of this solution and finding a competitive savings product might go some way to encouraging us to save more and help us reach our targets."

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NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.