Quarter of first-time buyers not putting down a deposit

Ramesh Sharma

April 29, 2006

Research conducted by Bradford & Bingley has revealed that 24 per cent of first-time buyers (FTBs) are not putting down any deposit when buying their first home.

The findings, published in the lender’s First-Time Buyer report, showed a 2 per cent increase in the number of consumers taking out 100 per cent mortgages.

The offering of 100 per cent mortgages by lenders has been criticised by some within the industry, but Duncan Pownall, mortgage development manager at Bradford & Bingley, believed affordability was the key for the client.

He said: “The key to any mortgage is affordability because a buyer might have a 50 per cent deposit but, if they cannot make the monthly repayment, then they are going to struggle. As long as the buyers can meet the monthly payments and they are aware of the risk involved, a 100 per cent mortgage is more than acceptable.”

The plight of FTBs is well documented and the report further highlighted this. 43 per cent of those questioned said they had considered giving up on buying their first home before they completed their purchase.

However, the number of people taking on a mortgage of five times their income has reduced from 17 per cent last year to 8 per cent.

Pownall added: “Most people are realising the full cost of borrowing as they know they have to cope with other expenditures, such as car and student loans.”

Daniel Clayden, director of Clayden Associates, commented: “The 24 per cent figure is a fair reflection and the slight rise is down to the fact house prices haven’t moved much over the last 12 months. I always recommend the client gets at least a 10 per cent deposit as it opens up a wider range of products, reduces the higher lending charge, if there is one, and reduces the possibility of negative equity if house prices fall.”

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