More and more people dream of owning their own house these days rather than renting for the rest of their lives. However the housing market presents a very solid barrier which keeps on getting higher for first time buyers. This can be accounted to the fact that buy-to-let mortgages have become very popular nowadays and very easy to get if you are already on the property ladder. We can also say that high city bonuses have contributed towards a more difficult environment for first time buyers as more city bosses have been grabbing property on the market as an investment in equity.
So where does that leave the first time buyers? In my opinion it increases the desire for people to want to own a house and thus making it even harder as the demand for homes increases and the supply for it stays low - simple law of demand and supply. However if more new houses were being built, then it would certainly increase the possibility of first time buyers getting hold of a home for them to cherish. Sadly though, there are not enough new developments to provide for an ever increasing population and it keeps getting worse day by day.
People are being forced to take on mortgages which are upto 6 times their salary to afford a house these days. They are not able to save up for a deposit either as the more time they wait and save up, the higher the house price are going up. And by the time they've saved up a decent amount of money for the deposit, house priced have increased five times more than that. So it is not even worth thinking about saving for the deposit as the average person does not earn enough to be able to save.
For those who have been able to buy a house, it is even worse as monthly payments keep going up. This is due to the fact that interest rates have gone up and this has a cascading effect on mortgage payments. For a person who is already stretched to the limit, even a small increase in repayments can cause severe financial difficulty. That is why so many people are falling back on the help of credit cards to avoid their homes from being repossessed. Others are taking personal loans to cover the extra cost. However there will be a time when no options will be available and the so called homeowners will be greatly in debt.
If a 100% mortgage has been taken, things can get messy when house prices start to go down as this will leave the homeowner with negative equity. Some mortgage lenders even give out 102-125% mortgages and the extra money is supplied through an unsecured loan. Any turmoil in the housing market and the homeowner will have to declare bankrupt.
With this in mind, the smart buyer will have to wait and see how things are going before taking the plunge into potentially devastating opportunities.