It is getting easy to find statistics that tell you the housing market is in trouble. But none is quite as convincing as this one: according to the Financial Services Authority, the proportion of new lending done at a loan-to-value of more than 90% now accounts for just over 2% of the total.
That represents a tiny rise from the first quarter of the year (1.6%), but a massive fall from its levels at the peak of the bubble back in mid 2007. Then, very high loan-to-value lending accounted for more like 15% of total mortgage lending.
This matters. Why? Because it is first-time buyers who take out high loan-to-value mortgages. So these numbers tell us that despite the fact that mortgage lenders are ostensibly loosening up their product ranges, they still aren't lending much to new entrants to the mortgage market. A report from the Council of Mortgage Lenders backed this up earlier in the week: it seems that, while the overall number of new mortgages written rose very slightly in July, the number that went to first time buyers fell by 2%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
That should come as no great surprise given that the vast majority of mortgages remain reserved for those with a 30-40% deposit and that first time buyers are currently being asked for an average 24% deposit if they want a loan (that's up from 21% back in May, so things aren't exactly improving).
However, miserable as this all sounds, we wonder if, in a few years, would-be first-time buyers won't be heartily grateful to the mortgage providers for their reluctance to lend them any money. The absence of young buyers from the market may be part of the reason it has entered its latest swoon (if there is no last link in a housing chain, there is no chain), but it is far from the only one: richer buyers can't get finance particularly easily anymore either, supply has been rising fast and the spectre of the huge spending cuts to come isn't doing much for employment or confidence.
How much better then for first-time buyers to rent for a few years -a decade even -and to enter the market for their dream home when prices have normalised a little and when they are better able to afford it.
-
A junior ISA could turn your child’s pocket money into thousands of poundsPersuading your child to put their pocket money in a junior ISA might be difficult, but the pennies could quickly grow into pounds – and teach them a valuable lesson about money
-
Cost of Christmas dinner jumps 6.5% as grocery price inflation rises againThe average Christmas dinner for four now costs £32.57 as grocery price inflation increases - but what does it mean for interest rates?
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
