A recent survey conducted on behalf of the Halifax has revealed that UK residents perceive the inability to raise a big enough deposit as the biggest barrier to buying property.
Findings from the 2014 Q2 survey have revealed that many UK residents experience four major barriers preventing them from purchasing the property they desire. These include; job insecurity, an inability to raise a big enough deposit, rising property prices and household finances. Of these factors, the largest proportion of respondents (55%) cited ‘being able to raise enough deposit’ as a barrier. This was closely followed by job security (49%).
Since the financial crisis seven years ago, mortgage lenders have been increasingly vigilant in the provision of loans. Responsible lending is now top of the financial agenda and lenders have been keen to ensure that purchasers are in a stable financial position as well as having a vested interest in the property they are buying.
Ten years ago loan to value ratios were much higher than they are today and 100% mortgages were not uncommon. Today however, most mortgage agreements require much larger deposits. In June 2013 the average loan to value for first time buyers was 80%, for home movers it was 70%.
For first time buyers, finding a 20% mortgage on an average priced house equates to around £36,000, a tall order when you factor in other costs such as solicitor fees, surveys and stamp duty.
In recent years the government has been more aware of such barriers and the introduction of schemes such as Help to Buy, which helps people move with a smaller deposit, have offered the helping hand that many purchasers need.
Those utilising the Help to Buy scheme can purchase a property for as little as 5% of its value. The remaining balance of the property cost is jointly funded by loan of up to 20% from the Government, interest free for 5 years, and a regular mortgage from a traditional lender.