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From The Times

March 14, 2008

The choice for first-time buyers is save, save or save

There is precious little in the Budget to help the majority of would-be homeowners - so forget holidays if you want to get on the property ladder

Mary Beth Frank bought a two bedroom apartment last summer with her identical twin Avis Frank

Lorna Blackwood

The Chancellor did not extend a helping hand to hard-pressed first-buyers who do not qualify for keyworker schemes. The stamp duty rates remained unchanged - despite a campaign that highlighted the benefits of a concession both to would-be owner occupiers and the faltering housing market.

This failure to act adds to the pressure now facing twenty and thirtysomethings who cannot take advantage of the Bank of Mum and Dad. In addition, the availability of first-time buyer mortgages deals is now restricted, with the withdrawal of 100 per cent loans and the insistence that applicants must have saved 10 per cent or more of their purchase price.

Stamp duty is charged on the full purchase price of a property starting at £125,000: just 16 per cent of homes are priced below this threshold. Currently, 61 per cent of first-time buyers pay stamp duty; the number paying the higher rate of 3 per cent, for properties valued at over £250,000, has risen to 11 per cent. Halifax figures show that nearly all first-time buyers in the South now pay stamp duty; the average stamp duty bill in London is now £8,675.

Chris Coates, managing director of Galliford Try Homes, said: “The Chancellor is out of touch with the financial pressure facing this group and seems unable to grasp their importance in the housing market.”

Jonathan Cornell, director of Hamptons International, the mortgage broker, explains that some lenders such as Halifax and Nationwide remain aware that they have an obligation towards first-time buyers, but, although they would like to help, they, like other banks and building societies, are constrained by the shortage of funds as a result of the credit crunch.

One option now open to those determined to find a place of their own is to take advantage of incentives being offered to tempt buyers into new developments.

Marybeth and Avis Frank have bought their first home at a Bryant Homes' development in Northolt, northwest London, with help from the developer. “We had £10,000 saved up but still found it hard to find something affordable,” Marybeth explains. So the twins were relieved to learn that Bryant was offering to pay a £10,000 deposit as well covering the stamp duty on their new two-bedroom flat. Marybeth adds: “We have a sizeable mortgage and it is quite a stretch even with our two salaries, but at least it is our own place.”

The financial discipline that these sisters have learnt must become a way of life for anyone hoping to buy their first home, as Melanie Bien of Savills, the mortgage broker, explains: “If you have a lot of debt - credit cards, overdrafts, etc - try to clear it. More lenders are looking at affordabilty criteria rather than strict income multiples when deciding how much you can borrow, which means they take into account the levels of debt, as well as your salary.

“It is also worth checking your credit record with Experian or Equifax to ensure all entries are correct: if someone has been making fraudulent applications for credit in your name, for example, this could seriously harm your credit history and affect your ability to get a mortgage. You should also be aware that if you miss a payment on a credit card this will be marked on your file, so try not to be careless about such commitments.”

Jonathan Cornell also has some advice to anyone who wants to climb onto the housing ladder in this new tough climate. “Forget the new plasma TV screen, and even the holiday: just keep on saving”.

I agree with the other two posters - to buy now is insane. 2009/10 look like being bad years, where you're pretty much guaranteed to lose money on property. After that, maybe things will improve. My advice is, don't even think about it until then.

SMW, Chesham/Bucks, UK

Good point JC - why on earth would a property developer or anyone else pay someone to buy something from them? Building societies are really clamping down on lending on new-builds, not surprising given the number of stories of falling prices. Still, at least this is a sign that the market is finally wising up to the fact that it's not a good time to buy.

Richard, London, UK

Developers' offers to pay deposits and stamp duty is, at best, the sharp practice of artificially inflating the value of their development.

The land register will show the sale price that the developers want, but the actual selling price will be as much as 30% less depending on how much the developer "gives" to the purchaser by way of "incentive".

Lenders are often unaware that the true cost to the purchaser is much lower than that shown on the deeds.

Surveyors are now prohibited from valuing properties based soley on such incentivised off-plan prices, as this is not a true indicator of the value of the property.

Guess who benefits most from these schemes?

JC, London,

Why on earth would anyone buy a property that is guaranteed to be worth less than you paid for it in a few years and why does this newspaper persist in peddling this irresponsible twaddle to its readers when it should be offering a frank assessment of the current ailing property market.

rick, sydney,

How to Get On the Property "Ladder": wait until the market has crashed and bottomed out and then buy in at 50% of the cost you would face now. It's a no-brainer.

MB, Edinburgh,