Buying your first home

Buying your first home

People looking to buy their first home at the moment will be fully aware that the availability of mortgages is more restricted than it has been in years, but there is still hope for first-time buyers in the months ahead.

According to a recent report by the Post Office, one means of gaining access to the property ladder is through a shared mortgage.

The organisation claims that for many this may be the only means of doing so unless they have a substantial deposit, and indeed for many young couples it could be an attractive option.

According to the data, young people think that buying with a partner may be the only way to get onto the property ladder, with 42 per cent of 18 to 34-year-olds citing this as the main reason why they would buy with a partner before marriage.

In the current climate, people are also beginning to join forces with friends and family when buying a property, with this being a popular option for 44 per cent of people who were not in relationships.

Conversely, 19 per cent of people are taking the traditional approach of only considering buying a property once married.

Mike Cook, the Post Office head of mortgages, pointed out that purchasing a property is a "big commitment", whether with a partner or friend.

"With many first-time buyers finding it hard to get on the property ladder, for some couples buying a house together before marriage is out of financial necessity, rather than just 'playing house'."

"We are also seeing an increasing number of applications from friends or family members buying together as people seek other ways to get themselves on the housing ladder. You can have up to four people on a mortgage, so friends can take that first step together," he added.

The expert advised that choosing the correct mortgage for the situation, regardless of the lender and estate agent, will help first-time buyers to complete the process more smoothly.

Outlook for 2011

When it comes to buying a mortgage, Paul Holmes, chief executive of Firstrung, said that 2011 will still be difficult for first-time buyers, but not impossible.

"I think they will be affordable. I still think they will be scarce because of all of the liquidity that is pumped into these banks. So if a new borrower wants money, it will be a question of 'does he have 25 per cent liquidity in the property?' or 'does he have a 25 per cent deposit?'," he explained.

According to recent figures from the Council of Mortgage Lenders, gross mortgage lending stood at December was £11 billion, representing a six per cent fall from the £11.7 billion recorded in November.

Furthermore, December was the fourth month in a row where the monthly outturn was the weakest since 2000.

Overall, lending totalled £34.4 billion in the fourth quarter of 2010, down from the £37.9 billion recorded in the previous quarter and 11 per cent lower than the last three months of 2009.

Bigger deposits in the future?

Mr Holmes explained that bigger deposits may therefore be the only way of securing a mortgage.

"We have seen a brief flirtation with ten per cent deposits; I think they will go in 2011 for the most part - the normal mortgage will be a 20 per cent deposit.

"On that 20 per cent deposit, the banks will feel safe. A 20 per cent correction in terms of house prices is probably what they are factoring in over the next two years," he explained.

It all suggests that people looking to buy their first home in the coming months may wish to consider teaming up with friends, family or a partner to ensure they can be granted a mortgage - or stumping up the cash upfront to guarantee it.