Falling house prices will not benefit all first time buyers

Published: December 05, 2007

The current slowdown in the housing market may offer benefits to some first time buyers, but most will still face difficulties securing finance such as mortgages, a real estate expert has warned.

Price falls in the market could provide opportunities for first time buyers who have saved significant amounts of cash for their house purchase, explained Lucian Cook, director of research at global property provider Savills.

However, many people looking to get onto the property ladder will be hit by a tightening of lending conditions in the wake of the global credit crunch, making it harder for them to secure first time buyer mortgages.

"In the short term, it's unlikely to help that many first-time buyers because they're still going to be reliant on mortgage finance, and I suspect that that mortgage finance is going to be harder to come by as a result of the credit squeeze," Mr Cook said.

"The first-time buyers who [price falls] will help are those who have accumulated relatively high levels of cash reserves, and who are well placed to buy," he added.

The Financial Services Authority today (December 5th) warned mortgage lenders to protect themselves against the worst effects of the credit crunch by following a more cautious line with their allocation of funds to borrowers.