Mortgage Lenders Start to Appeal to First-Time Home Buyers

The housing property market in the UK is starting to look up for anyone aspiring to take their first forays into home ownership. Housing affordability has made some improvements to be twice as good as it had been in 2007. While first time buyers still find property prices beyond their means, housing lender Halifax published its finding suggesting that the mortgage costs as a percentage of the average family income have dramatically shrunk making it easier to own a house.

The claims of the lender needs to be taken with a grain of salt as it could be an effort to drum up housing sales in the midst of a continuing slump in housing projects and the official trend of increased house rentals.

Halifax claims that mortgage payments are nearly half that of 2007 levels. But it admits that affordability reached its worst point in that same month when the disposable income of half of prospective homeowners was being eaten up by mortgage payments.

So when it compares the current mortgage situation today with the worst of the past, it speaks little encouragement for new property buyers. The situation hasn't really made much progress since 2007.

Halifax also claims that the house prices have fallen but in reality, that's more because interest rates have remained static at their historically low levels for more than 18 months.

And while the average middle class may benefit from the Labour government's revisions in stamp duty, raising to â,¤250,000 the tax threshold to benefit 94% of first time home purchases, the fact remains that this is just a 1% tax breather to the cost of a home.

But regardless of these claims, the most discouraging barrier for people buying homes for the first time is the lender's reluctance to approve mortgage application in the last two years.

While understandable from the credit crunch resulting from the global economic crisis during the last 2 years, this reluctance also put them in a less than profitable situation.

Everyone knows that these lenders earn money from interest rates and the more they lend, the more income they get. So now, as Stephen Noakes, Halifax's commercial director for mortgages says, the situation has improved, noting further that "eight out of 10 first-time buyer mortgages are approved."

But this fails to account the fact the lenders continue to play it safe by requiring huge up-front deposits which effectively put off prospective buyers applying for a loan. For instance the best interest rates and discounts go to borrowers can deposit at least 25% of the property price while the best deals are reserved to those you can provide 40% deposit.

It is clear that the greed and meanness of lenders have not waned and continue to take advantage of the credit crunch.

If there's any sign of hope, this meanness seems to be easing up a bit. Andres Hagger of the Moneynet.co.uk site opines that lending competition that has driven lower interest rates have started to make a pitch to first time buyers with more mortgage choices.

This view is shared by Melanie Bien of the mortgage broker Private Finance saying that there are now more product choices for first time buyers who can afford 10% deposits than there was in 2009.

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