Deposits greatest challenge for would-be buyers

More than three in five see raising a deposit as the biggest barrier to buying their dream home, the BSA has revealed.

Despite the perceived challenge, two in five still see this as a good time to buy property.

Paul Broadhead, BSA head of mortgage policy, cited new Mortgage Market Review lending rules as a key reason why perceived challenges to buying property have risen since Christmas.

He said: “A new feature is the requirement for a lender not only to establish that a borrower can afford the loan at the current interest rate, but also if the rate were to rise.

“Overall, whilst some people may not be able to borrow as much as they expect it does not mean that those on lower incomes or those with smaller deposits will be frozen out of the property market. What it does mean is that lenders will continue to take a common sense approach to mortgage lending. It is important that the regulator does the same.”

“All applicants, bar a very few specific groups, will receive mortgage advice. Whilst this means that the mortgage application process will take longer than before, consumers will benefit from the advice on what is probably the biggest purchase of their lives.

When asked what is the biggest risk to the housing market, many cited a potential interest rate rise, with almost three in 10 admitted they are wary of such a hike.

If rates were to rise by just 1% some 14% of homeowners say making mortgage repayments would be difficult. Two in five however state they wouldn’t be affected, while a fifth think they would be better off due to better interest they would receive on savings.

Broadhead added: “If people are worried about the repercussions of a rise in interest rates on a current mortgage, or have questions about their ability to access mortgage finance, we would encourage them to talk to their lender for information, advice and support.”