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According to the Land Registry, house prices in January were down by 15.1% since the same time last year.  Every region in England and Wales has seen property prices fall by at least 12% in the last year.  Buyers are waiting until they see that the market has bottomed out, and with the waiting, house prices are expected to continue falling for the next few months.  There are however signs that the freefall may be easing and soon may have reached the bottom. 

For example, with prices in prime spots in London being down up to 20% compared to the March 2008 peak coupled with the weak pound, buyers from overseas are seeking to pick up a bargain.  The window of a strong euro against the pound and the security of bricks and mortar in prime location adds further appeal.  Although Londoners themselves may object to property being snapped up it will be one small prop to help stabilise house prices.  Importantly, according to TimesOnline, cash sales, which are not recorded in the statistics produced by Nationwide or by Halifax, now account for a whopping 40 per cent of transactions as buyers turn to property as a more lucrative alternative to low-paying deposit accounts.

Mortgage availability is beginning to see change.  In January, mortgage approvals held steady at 31,000.  Although this is half of what it was last year, they have averaged 31,000 for the last six months.  Mortgage lenders typically want a deposit of 20% of the purchase price which is a hefty sum to secure.  Saving for a deposit takes time and in this time house prices fall.  However, Northern Rock will soon begin to offer some 90% mortgages.  The Bank of England is expected to lower base rates again and is also likely to increase the amount of money in the British economy, both of which will improve the supply of funds for mortgages.

The current low interest rates, although will not lead to a sudden housing market revival, do make loans more affordable which will be another positive support for both new and existing borrowers.  According to Halifax, mortgage payments have fallen from 31% of gross earnings for a new borrower in the first half of 2008 to an estimated 21% in January 2009.  The house price to average earnings ratio has decreased to an estimated 4.48 in December 2008 from a peak of 5.84 in July 2007; a fall of 23%. The long-term average is 4.0.  Potential buyers are noticing the opportunity: according to the Royal Institution for Chartered Surveyors enquiries from new buyers rose in January 2009 for the third successive month.  

Of course, there continues to be pressure on incomes with rising unemployment and the negative impact of the turbulent financial markets on the availability of mortgage finance, but the update is that there are signs that the freefall on house prices and drought of mortgage availability is easing.  As such, it could be wise to buy before house prices reach bottom as with low prices, low interest rates and increased mortgage availability an eventual recovering economy could bring house prices to rebound sharply.

There are many different predictions as to how long the recession will last and as we progress the predictions seem to point towards a longer recession (ok not technically yet). House prices are also predicted to fall further and not likely to recover until at least the second half of this year. I’ve heard predictions of a further 15% fall in house prices in 2009.

Although stability is returning to the mortgage market, mortgage lending has risen in November, there are still too many negative factors affecting the market from rising unemployment, widespread expectations of further house price drops and tightened credit conditions – despite the rising lending it is still only 10% of the 2007 level.

For first time buyers whether you want a Falkirk mortgage or Fulham mortgage my advice would be to save! While house prices continue to fall and mortgages are difficult to obtain my advice would be to work on saving for a deposit so when the market does improve, you are maximising your options to ensure you pay a good price but also get a mortgage at a good rate.

If you want to see what is available to you, a good mortgage broker can search the whole market to give you an idea of what to expect, it is even worth doing so you can compare this to a mortgage quote in six months time. Even if you do have a mortgage it is still worth using the services of a mortgage broker to ensure you are getting the best deal, especially if you are on a standard variable rate which can often be a higher rate than fixed rate mortgages.

About a week after the first Thursday of the month would be an ideal time to search as this is when the Bank of England’s Monetary Policy Committee meet to decide on whether to keep, cut or increase interest rates. In January its widely predicted interest rates will again be cut.

The credit crunch has emphasised the importance of the first time buyer in the market place.   The first time buyers’ absence from property transaction chains is part of the “mix” which is preventing sellers from moving on and the market is consequently stagnating.

The road to recovery for the property market will require significant efforts throughout the property industry and also a change in Government policy to revive the first time buyers’ ability to get on the property ladder. Currently the lending institutions and Government policy have done little to alleviate the situation. There are measures that could be taken e.g. the raising of the Stamp Duty threshold even further and the Bank of England’s policy on interest rates these will be watched closely over the next few months.

The current re-adjustment of property prices means that buying a property could now become more affordable as property prices are returning to a more realistic level. The increase in the costs of living however means that it is harder to save the deposit that is now needed to purchase in the majority of cases. Instantaneous property ownership for anyone with an income is now a thing of the past.

First time buyers should be given a climate in which they can decide whether to take the plunge and take advantage of the current buyers market. Advice must be readily available from Mortgage/Financial Advisers, Estate Agents and Solicitors alike to make the first time buying process more attractive.

Buyers must be made aware that more preparation will be needed by them and the decision to buy will have to be carefully calculated. It is not just a matter of borrowing it is coping with the repayments that has to be properly considered. To give a simple example if you were paying a mortgage at 4% interest then an increase to 5% would be stated on TV as an increase in the mortgage rate of 1%. If you are the mortgage payer then the amount you actually have to pay would have increased by 25%. The government need to facilitate a period of stability in the mortgage rates to limit the number of repossessions and to give confidence to us all.

The lack of variety of mortgage products may be a problem, however, by taking expert advice a first time buyer can assess the amount that will comfortably be loaned by a lending institution and how much deposit will be required before they consider buying. Borrowing from parents or family will be one option to raise the shortfall needed to purchase. Parents or family can all be considered by lending institutions as guarantors but must remember the risk to themselves. Buying with a partner or friend shares the burden of mortgage repayments as long as the correct legal advice is sought, these are valid options to get on the property ladder.

The Government is already committed to produce affordable housing and shared equity and shared ownership schemes can be considered by those on a low income. Over the last 5 to 10 years it is clear that property became regarded as an instant money making short term investment. In the current economic climate perceptions do need to change and first time buyers need to be reminded of the longer term traditional rewards of private home ownership. Those in rental accommodation should consider the long term ideal that instead of lining the pockets of a Landlord they could be paying into a mortgage for their future. More emphasis should be placed primarily on property being purchased to make a home and be considered secondarily as an investment for the long term future.