In my opinion, the Council of Mortgage Lenders are prone to spouting a lot of nonsense with its press releases, however they are spot on when it comes to First Time Buyers.
The number of loans to first-time buyers declined to 17,300 in July, down 5% from June and down almost 50% from July 2007.
This massive decline in First Time Buyer numbers has occurred mainly due to the tightening of lending criteria, and to a lesser extent, due to a loss of confidence in the market (they ask themselves why should I buy this now when it'll be £5000 cheaper in 6 months?) It seems that the secret of Vendor Gifted deposits has not been picked up across the country yet.
With Vendor Gifted, any discount negotiated on a property could be used towards the deposit.
This is obviously a godsend to those trying to get on the property ladder.
Look at this example, two FTB's are looking at a house on Any street.
Both of the properties are available at £100,000, and both the FTB's manage to negotiate the vendor down to accepting £90,000 (not an uncommon situation in today's market).
The first buyer does not know about vendor gifted deposit.
He puts down 5% (£4500) and gets a rate of 7.
29%.
He has to pay a Higher Lending Charge (HLC) on top of his mortgage of £2000.
In total he owes the bank £87500, costing him £535 per month.
The other FTB arranges the £10k discount to be used as a vendor gifted deposit.
He owes the bank £90,000 but doesn't have to pay a HLC.
He gets a rate of 6.
34% because as far as the banks are concerned he has 10% equity.
His mortgage costs him only £475 per month.
Did you just see what happened? The person who saved hard and put down a deposit pays £535 per month; the person who worked the system pays £475 per month! This shortcut is miraculous.
In this instance the price logged at the land registry would be £100,000, and officially the applicant has put down a £10,000 deposit.
It is this system which makes the figures look like the average first time buyer has a deposit of 15%, as per the facts spouted by the CML.
As a First Time Buyer I encourage you to find out more about a Vendor Gifted Deposit.
This is a shortcut that works!