Good News for First Time Buyers?
October 11, 2009
With low interest rates and the recent falls in property prices, most people would be better off buying than renting. For the estate agency profession, this news could not have come at a better time as the property market is traditionally entering a slow down period in the run up to Christmas.
According to the high street bank Abbey, first time buyers in all areas of the country (outside London) could save £52 a month by becoming owner-occupiers rather than renters. The reason for this is due to the sharp falls in property prices and low interest rates. It is estimated that the typical starter flat or home has fallen by approximately 9% meaning that a terraced home or 1 bedroom flat can be bought for approximately £92,000.
Whilst this is all very exciting for those thinking of buying rather than renting, the bad news is that you will have to have saved hard in order to raise the 25% deposit upon which these calculations have been based. If you are lucky enough to be in that enviable position, based on a 4.38% mortgage rate, your monthly repayments would be £382. Renting a comparable property costs an average of £434 per month meaning that you could be some £600 better off a year. Great news and yes worth a celebratory drink (not too many as remember the deposit). However, the uncomfortable reality check is the 25% deposit. In the dim and distant past when I bought my first property, I managed to cobble together a 10% deposit for which I was extremely proud. Today, those nest seekers have little choice other than negotiate a "loan" from the Bank of Dad or purchasing a property with a partner. Have the days of independence gone forever?
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