First-Time Home Buyers In London Get Shut Out Of New Mortgages

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Bad news for first home buyers in London.

First-time buyers, who are a big part of 2014’s mortgage boom, are slowly “disappearing” by the droves in the capital’s mortgage market.

The Council of Mortgage Lenders issued a new report claiming that the number of young couples, families, and professionals applying for a home loan on the Greater London area has dropped for the first-time from October to December of last year.

Figures showed that 12,000 loans with a value of £2.9 billion were taken out in that period.

This may seem a huge number for regular folks right us, but compared to the performance of home loans in the months before October to December these figures are already lower, according to bankers.

Peter Rollings, managing director of the London-based estate agent, Marsh & Parsons revealed in an interview that the low number of first-time buyer mortgage applications and approvals was a direct result of the mortgage market review (MMR), which was introduced on April 2014.

He added in an interview that when people started looking at the big picture impact of the MMR and thought about whether they can really afford the loans even when regulators introduce stricter requirements again, they all backed away from acquiring mortgages for now.

Despite the slowdown, Rollings is still optimistic that many first-time buyers will return to the mortgage market after the they’ve gotten accustomed to new stamp duty rates. Stamp duties were modified earlier this year, so buyers of the sub £1.5m market are still preoccupied at the moment, he claims.

Other bankers, however, are less optimistic with their outlook for mortgage transactions in the capital.

Paul Pavlides a buying agent from Prime Purchase said in an interview that the upcoming election and stamp duty changes have greatly slowed down the volume of first-time buyer mortgages in the capital.

He said that there is too much uncertainty in the market as a whole, so they are not expecting any growth in London values this year.

The bottom line of this news for me is that first home buyers are feeling choked with the strict requirements for lending imposed under the MMR.

You may agree with me or not, but the truth is, odds are stacked against many first-time homebuyers at the moment. The cost of almost everything from utilities to house prices have risen steadily in the past couple of years, but wages remain the same.

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Saving for a deposit is becoming harder and harder for younger people these days.

In this situation, young people, who make up the bulk of first-time homebuyers in the UK, are unable to save up for a property deposit on a mortgage. And we all know that when you don’t have the right deposit, lenders won’t approve your application.

To make matters worse, not only do first-time buyers need a high deposit fee, they now need a boat load of qualifications (under the MMR) to meet before the lenders could finally approve the application. So even those buyers who manage to come up with the required deposit, still don’t have a sure shot of getting a mortgage.

Given the current market, it has become more challenging for first-time buyers to apply for home loans. However, I don’t think it’s an impossible ordeal. I know of a couple who pitched in financially to help their kid (the ‘kid’ is 24 btw – which hints at my age) buy a home. So for as long as you’re willing to explore other options, buying a house is still doable for first-time homebuyers.

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