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The House Hop First Time Buyer Guide
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Click here for free conveyancing quotes
*£850 is the average saving on a typical sale and purchase through our panel of conveyancing solicitors compared to using a high street solicitor (Survey of 52 high street solicitors, September 2010).
Credit Crunch
First time buyers have had a hard time of it during the last few years. First, the housing boom priced many out of the market. Then, as prices dropped, the credit crunch made it much harder to secure a mortgage and led to lenders requiring larger deposits.
There may be light at the end of the tunnel, however. Most housing market commentators expect prices to drop around another 10% or so before stabilising. That's on top of a drop of around 20% between the end of the boom in late 2007 and May 2009.
If house prices do continue to drop this will bring them closer into line with the historical average. According to Halifax, the average house price to earnings ratio was 4.36 in May 2009. This is down significantly from its peak of 5.84 in July 2007, though still above the long term average of 4.00.
It's also worth bearing in mind that when the market corrects itself the house price to earnings ratio tends to drop below its average. For example:
In the crash of the early 1990s it dropped below 4.00 in August 1991 and then fell steadily before bottoming out at 3.09 in October 1995. It then took until July 2002 before it returned to 4.00 again — a total of 11 years!
If prices do continue to fall and banks gradually relax their lending criteria then first time buyers could find themselves in their best position for years. Especially if interest rates continue to remain low, though how long they will is not clear.
