The Financial times has reported a significant increase in the number of first time buyers looking for a mortgage during the last 3 months. Figures show that applications from first-time buyers accounted for more than 40 per cent of all borrowers. This compares to less than 10 per cent in October last year.

The fall in house prices has at last made it easier for first time buyers to afford their first property. There are now a number of mortgage loans available at 90% loan to value and a handful at 95%. These rates are of course expensive and the most competitive rates are available for those with a 25% deposit.

First time buyers are the life blood of the property market since when they stop buying the chain can not get started. So this is at last some good news on that front. Long may it continue.

The Government earlier this week set out a package to inject £100 billion into the banking sector.

The problem up to now has been the lack of desire for banks to lend to one another. This in turn has caused a severe lack of available funds from lenders, making mortgage finance very limited. To deal with this banks have therefore been extremely choosy has to who they lent money to, and have tended to lend only to the safest of borrowers, i.e. those with a significant deposit. This has made it very difficult for others to have access to funds at anything like a reasonable rate.

This latest bail out by the Government should improve the amount of funds available. The government has also made banks promise to increase the amount of lending they are doing.

Will it work?

At this stage the details of the available funding are too limited to be able to assess the impact with any certainty.  But it is the next step in trying to cause the problems that lack of liquidity has caused.

Due to the recent falls in house prices, now can be a very good time to move up the property ladder.

The Financial Times has reported that according to Propertyfinder.com those looking to make the jump from a one-bedroom to a two-bedroom home now have to find an extra £31,000, while a year ago they would have needed £41,500. This is because the average price of a two-bedroom property has fallen 12 per cent in the past year to £160,600, while the value of a typical one-bedroom home has fallen 8 per cent to £129,874.

When prices are at their peak, all areas of the market tend to move up at the same pace. But in a falling market, certain areas, streets or buildings hold their own better than others.

The FT reports estate agents believe homeowners are increasingly willing to take a hit on the sale price of their own property as they are able to secure greater discounts further up the chain. Some people are even willing to sell their property for less than they bought it for two years ago, as the loss is irrelevant if the saving on their new purchase is bigger.

Homeowners considering a move up the ladder are advised to find the property they want to buy, and see what discount they can achieve, before putting their own house on the market

Selling your house in the current market generally means waiting a long time to find a buyer. But there are ways to speed up this process.

The Financial Times yesterday printed a “practical guide to selling property”. Whilst a number of points are mainly common sense I thought it was worth repeating them:

• Know the current situation in the housing market
• Price your property realistically
• But don’t go too low
• Smarten up your place to attract a buyer
• Beware of guzundering (where buyers pull the price down at the last minute)
• Avoid delays in the selling process
• Wait for a firm offer on your property
• Eliminate the problem

For the detailed article please click here.

Base rates have fallen from 5% in October 2008 to 1.5% now. Mortgage rates have also fallen- not by as much but still by a significant amount. This does mean that monthly repayments on your prospective home loan have been slashed dramatically in the past few months. Therefore if you are looking for a loan today you will be able to get that loan at a much lower rate than if you were looking in Autumn,

However, the downside is that due to the uncertainty in the market lenders are requiring much bigger deposits than was previously necessary.

The Financial Times has reported that 60% of all deals now require a deposit of at least 25%.  And 25% of all deals, those with the most attractive interest rates, now require a massive 40% down payment.

Therefore whether you can benefit from the fall in rates depends on the amount of deposit you have been able to save.

On 8th January the Bank of England cut base rates by 0.5%, bringing base rate down to 1.5%- the lowest figure in its 315 year history.
This time last year base rates were 5.5% and were considered to still be on the increase.
The bank has now reduced rates 4 times since it was at 5% at the beginning of October
However, cutting base rates is not enough on its own to get the economy moving. The biggest problem at the minute is liquidity- banks are just not lending to each other.

What does this mean for your mortgage?
If you’re on a tracker mortgage then you will benefit from the reduction.

However, if you’re on the lender’s standard variable rate (SVR) you need to wait and see whether banks will pass this on. C&G, HBOS and Nationwide have all said they would pass on the full cut to SVR. Halifax cut their rate by 0.25%. But we are still waiting to hear what other lenders plan to do.

Fixed rates by definition stay the same.