Only Finance.com - Credit crunch continues to affect potential homeowners

Loans - Credit crunch continues to affect potential homeowners

First time buyers are being faced with having to find larger deposits as the credit crunch continues to affect potential homeowners. Nowadays the average deposit needed for a first time buyer is 13% of the property’s value. According to the Council of Mortgage lenders this is the highest amount needed for a deposit on a property in 3 years. While this can offer a cushion against falling house prices for those who are able to pay, there are others who are unable to because they do not have the sufficient savings to put down as a deposit.

This has then put many people off from buying property as according to The Association of Residential Lettings Agents (Arla) 39% of their agents have reported that the demand for rental properties have out stripped supply already. Greater London and the South East are believed to have the biggest imbalance.

However the information available appears conflicting as in May, Capital Economics, a London-based consultancy, forecasted that rents would rise by between 10% and 11% over the next two years. But Arla have also said that rents were falling as there have been an influx in the number of new two-bedroom flats out on the property market.

"We are seeing corrections in individual locations throughout the country. The main cause of these is the developments of new blocks of two-bedroom coming on-stream” said Arla.

"In many places this has had a positive effect as it has allowed the rental market to provide stability in housing at a time of volatility in the sales market. It also demolishes the myth of soaring rent levels," they also added.

Arla have conducted their own research, which was based on responses from 444 letting agents, and found that there has been a fall in the average length of time that a property has remained empty between tenants; it has now dropped from 24 days to 22 during the last three months. They also found from their research that around 77% of landlords said they were not planning to either buy or sell properties in the near future.

In the course of the last week, major lenders such as Nationwide, Abbey and Bradford & Bingley have increased their rates of new mortgage deals. But last week analysts Hometrack predicted that there would be a 10% fall in house prices which would then enable a fifth of those currently priced out of the market to buy a two or three-bedroom home. So if you are thinking of buying property make sure you really can afford to.