As the UK economy continues to slow down, the effects of the credit crunch has left first time buyers in a no win situation.

Starting with the withdrawals of the 100 per cent mortgages, first time buyers begin to face more and more obstacles as the credit crunch eats its way through any chances first time buyers may have to step onto the property ladder.

According to HM Revenue and Customs, the number of properties sold in the UK has fallen by 32 per cent.  

Research has shown that approximately £300 billion has been wiped off the value of Britain’s homes allowing first time buyers time to celebrate the fact that house prices have fallen.

According to property evaluation website Zoopla.co.uk, the value of residential property in Great Britain has dropped from more than £6.1 trillion to £5.836 trillion in September 2007.

But then there is a downside which takes those first time buyers back to square one. To purchase a house, buyers would most likely need to take out a loan- something by which more and more banks are becoming so reluctant to lend!

A report by Professor Steve Wilcox of the University of York revealed that around 28.3 per cent of young working households in Britain cannot afford the cheapest properties in their local area.

He said, “While house prices are falling, access to the property market is being increasingly limited by the costs and more restrictive terms of a substantially reduced supply of mortgage finance.”

As the Bank of England face what ex-deputy governor responsible of financial stability, Sir John Gieve, describes as the “most challenging” climate status the Bank has had in 11 years of independence, first time buyers can expect a hard time to get a mortgage.

With 100 per cent loans being a thing of the past, first time buyers are advised to “take advantage of a tax free ISA or high interest savings account,” says National New Build Manager, Mike Bottomley, at the Halifax Bank.

But it doesn’t stop here. Once the buyer does eventually manage to save enough for a deposit or finds a bank willing to lend, the increase in food, tax, fuel, electricity and gas prices is another problem to think about.

According to housing and homeless charity, Shelter, the boom of housing costs have pushed people to breaking point causing bad housing, depression and even homelessness.

Head of Savings, Rachel Thrussell of Moneyfacts.co.uk said: “Savers are one of the few groups to have benefited from the credit crunch, with rates at some of the highest levels that we have seen in recent years.”

She continued that “With the banks and building societies struggling to raise money on the money markets, tempting savers has become increasingly important. With fixed-rate investments, the institutions can guarantee that they will have your money for a set period of time, which they can then use for lending on mortgages or personal loans.”

More recently, Louise Cuming at the price comparison site said, “The Bank of England is now more likely to consider increasing the base rate to try to combat inflation. What effect this will have on homeowners’ pockets and their increasingly fragile confidence doesn’t bear thinking about.”