A new survey from Equifax shows that almost half of potential homeowners will now wait to buy.
Recent headlines about falling house prices have been widely regarded as little cause for joy. That is, for everyone except first-time buyers.
Tales of plummeting property values suggest those who are yet to buy are in an increasingly strong position when it comes to purchasing their own home.
After all, when you're the one buying, when is paying less for something ever a problem?
Putting Off Plans
Unfortunately, the issue facing first-time buyers is not what they'll pay for a property, but how they'll pay for it.
In recent weeks, banks such as First Direct, Alliance & Leicester, Nationwide, The Co-Op and Abbey have slashed their mortgage offerings. Since last summer, the total number of mortgages available has shrunk from almost 13,000 to around 6,000.
According to a new survey by credit information provider Equifax, 47% of first-time buyers say the recent withdrawal of 125% and 100% mortgages has delayed their plans to purchase.
Many banks now demand a sizeable deposit from buyers looking for a competitive mortgage rate, which first-timers are unlikely to have.
What's more, Equifax found that 42% of first-time buyers have less than a 5% deposit available to put down on a home - no longer enough to guarantee an affordable mortgage deal. Conversely, just 4% have a deposit of more than 20% available.
In A Fix
The Equifax survey also showed that first-time buyers have a cautious approach to the type of mortgage they choose.
64% of potential home-owners said that they'd look for a fixed-rate deal, and 91% said they agreed with the recent budget announcement that more flexible and affordable long-term mortgages should be introduced.
However, despite of the Bank of England's base rate cut, many of the mortgages left on the market are still too expensive for some first-time buyers. 18% of people surveyed by Equifax said they would struggle to afford the monthly payments on a mortgage.
Dealing With Debt
Equifax also found that some people felt the need to deal with their existing debts before trying to get a mortgage.
A worrying 18% admitted they didn't think they'd qualify for a mortgage, while 13% said they were already in too much debt to think about buying a property.
With troubled times ahead for the economy, I think that sorting out existing money worries should be a priority for anyone with debts - even if it means you have to wait to buy a home.
Tips For First-Timers
If you are still thinking of buying your own home sometime soon, here are a few ideas that might help you.
Firstly, it's a good idea to get a copy of your credit report. Looking at this will give you some idea of how likely you are to be accepted for the best mortgage deals.
Remember that, thanks to the credit crunch, only those with unblemished credit histories will qualify for the very best rates.
Secondly, when you're thinking about how much you can afford to spend, remember to factor in expenses such as conveyancing, solicitors' fees, Estate Agency fees and stamp duty.
When it comes to budgeting, make sure that your post-move numbers add up too.
Good friends of mine have been walloped with unforeseen costs such as home and buildings insurance, ground rent, maintenance fees and council tax. These are easy to forget about until the bills land on your (new) doormat!
Finally, first-time buyers braving the mortgage minefield might want to consider using a broker to help them find the best deal possible. Take a look at The Motley Fool Mortgage Service which is fee-free and covers the whole market.
Whether you're determined to push your way onto the property ladder or planning to be patient, the golden rule is to plan your budget carefully, then stick to it. Good luck!
More: Death Of The Cheap Mortgage Deal | Buying Your First Home: A Complete Guide | Get Out Of Debt
