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Press Coverage
16.04.2008

Interest rate cut will not entice first-time buyers

According to Convex.net, the convenyancing firm, last week’s interest rate cut is unlikely to be sufficient to ensure the speedy return of first-time buyers to the market.
Last week, The Bank of England’s Monetary Policy Committee (MPC) announced it was lowering interest rates from 5.25% to 5%. This is the third time since December that interest rates have been cut in an effort to protect the economy from the global credit crunch.
Duncan Samuel, managing director of Convex.net argues that in spite of the cut, first time-buyers will still not be coming to the market in the current climate.
He added that the whole market is resting on first-time buyers and in the housing chains we are dealing with as conveyancers it is the bottom where the nerves are at their greatest.
The ongoing effects of the credit squeeze are proving inhibitive to first-time buyers securing a footing on the property ladder. Where a cut like this might once have given an instant boost, that is less likely to happen now, continued Mr Samuel.
More cuts would help the situation, but they need to come quickly. The Government should be looking at other ways of helping the first-time buyer, particularly through initiatives such as Stamp Duty reductions, concluded Mr Samuel.
Recent statistics from the Home Sale Network (HSN) show that the number of first-time buyers in the UK property market is falling.
Their research shows first-time buyers made up for around 14% of the market in the first quarter of this year. This is down from 17% in the same period last year.
However, the organisation which represents 750 independent estate agents, said there has been an increase in the amount of first-time buyers clubbing together with friends and relatives in order to get on to the property ladder.
In related news, the Government has announced a new scheme which will help first-time buyers and key workers to get onto the property ladder.
There will be £1,500 grants to help qualifying buyers with costs such as legal fees and furniture. Over £3 million has been allocated for the grants enough to help 2,000 people.
The grants will be offered to buyers who participate in the Government’s Open Market Homebuy scheme (OMHB) and those who qualify include social tenants, key workers and some first-time buyers.
Under the scheme, qualifying buyers take out a mortgage for a percentage of their home and then another loan, known as a shared equity loan, from the Government and lenders to pay for the balance.