First-time buyers’ confidence for 2005

Amanda Jarvis

January 27, 2005

• Thirty seven per cent would consider buying through a housing association and just under a third (31 per cent) would club together with family or friends
• More than one in ten (12 per cent) plan to get a 100 per cent mortgage

26 January 2005: Further to the five year action plan announced this week by the Deputy Prime Minister, John Prescott, to help first-time buyers get a foothold on the property ladder. Abbey’s own research amongst people planning to buy their first home1 shows just how tough they are finding it to get on to the first rung.

The research reveals why they want to buy, how much they’re prepared to pay, how they're going to find the deposit, and whether recent reports of a slowing housing market have influenced their buying plans.

Getting on the first rung of the property ladder

Property prices have risen to such a high level that many first-time buyers simply cannot afford to buy on their own. According to Abbey’s figures, 37 per cent would consider buying through a housing association and just under a third (31 per cent) would club together and buy with a family member or friends. A quarter (25 per cent) would also consider buying a wreck in the hope that it will provide a cheaper way of securing a property.

Recent reports about falling house prices appear to have influenced first-time buyers, however, with 42 per cent saying they're sure house prices are going to come down in the future.

The price first-time buyers are prepared to pay for their first home:
Price first-time buyers are prepared to pay
Up to £100,000
£100,000 – £125,000
£126,000 – £150,000
£151,000 – £175,000
£176,000 – £200,000
£200,000 – £250,000
Over £250,000

Gathering a deposit

When it comes to a deposit for the property, more than half of first-time buyers (57 per cent) will save up for the deposit themselves, seven per cent will get a helping hand from family but 12 per cent intend to forego the deposit altogether and get a 100 per cent mortgage.

Of the first-time buyers who are raising a deposit, forty two per cent aim to have at least a ten per cent deposit and just over one in ten (12 per cent) aim to have more than a 20 per cent deposit.

Interest rates

Forty per cent of first-time buyers feel that a further interest rate rise in 2005 would adversely affect their decision to buy, whilst 21 per cent said this wouldn't deter them. More than a third (39 per cent) don't know whether a rate increase would affect their decision to buy their first property or not.

Why buy?

Not surprisingly, the most popular reason for buying a home is to get on the property ladder (49 per cent). The next most popular reasons are to stop paying rent (41 per cent) and to obtain own space and independence (42 per cent). Buying as an investment for the future is the fourth most popular reason at 27 per cent.

Barry Naisbitt, Abbey's Chief Economist, said: “Our research shows just how tough people are finding it tough to get on to the property ladder. It’s clear, however, that potential homebuyers are trying to boost their chances of owning. Nearly 60 per cent will be saving for a deposit and more than half of all potential buyers are looking to have a deposit of 10 per cent or more. Not only might this help them get better mortgage deals, it could offer some protection against negative equity should house prices fall.”

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