First-time buyers urged to ‘batten down the hatches’ until spring as mortgage approvals fall

A recent poll showed home buyers expect to be in their mid thirties before they will be able to buy in London (Matt Writtle)
A recent poll showed home buyers expect to be in their mid thirties before they will be able to buy in London (Matt Writtle)

First-time buyers have been urged to “batten down the hatches” and save up a deposit to use from spring onwards after data emerged showing plummeting mortgage approvals and growing pessimism over home ownership chances this winter.

Simon Bath, chief executive of property technology provider iPlace Global, said getting a foot on the property ladder had become increasingly difficult since September due to a combination of lender nervousness and squeezed budgets.

Figures published by the Bank of England this week showed that mortgage approvals were down nationwide from 66,000 in September to just 59,000 in October. Mr Bath said the picture was even starker in London because of high property prices.

Meanwhile a poll commissioned by digital bank First Direct showed that nine in 10 prospective first-time buyers in London worry the cost-of-living crisis will impact on their ability to purchase a home.

This group expects to be 36, on average, when they get hold of their inaugural set of keys. This compares to current homeowners in the capital, who typically purchased their first property in their 20s.

Mr Bath told Homes & Property the market had almost ground to a halt in the capital as lenders tightened the screw on affordability criteria for mortgages and house hunters struggled to find the equity to keep up.

“The multiples of income that lenders are willing to offer have decreased substantially from just four months ago,” he said. “Coupled with that, the Bank of Mum and Dad, which has propped up the first-time buyer market in London, has dried up alongside inflation and cost-of-living concerns.

“It is time to batten down the hatches and save money for a deposit so you can be in a better position in the spring.”

The average house price in London stands at £682,000, according to data published in November. With some lenders now asking for 20 per cent deposits, according to Mr Bath, this now requires a property hunter to find more than £135,000 to put down as a deposit on a typical London home.

No surprise then that one in five potential buyers polled by First Direct said they didn’t ever expect to achieve their aim. A third said it would take them more than seven years to save for a deposit while a similar proportion were waiting for inheritance to be able to buy.

First Direct chief executive Chris Pitt said getting on the ladder was a “distant dream” for many people.

“The rise in house prices relative to incomes is well documented, as is the difficulty in saving for a deposit while at the same time paying rent,” he said.

“What this study shows is the time it takes to save and realise the dream of home ownership — it is a long time and getting longer. The state of the economy will only make this situation worse.”

An economist this week claimed that homeowners in the capital are now spending three-quarters of their incomes on mortgage payments.