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'Green shoots' is a controversial subject at the moment - especially in the housing market. House prices have finally tumbled to a level that many first-time buyers had been waiting for. The price of the average home now stands at £158,000, according to Halifax, compared to more than £200,000 at the peak of the housing boom.
However, there are still a number of hurdles standing in the way of many aspiring homeowners. We take a look at some of the common problems and how you can overcome them.
Limited choices
The number of mortgage deals has plummeted by 60% over the past year and would-be first-time buyers are feeling the impact of this shortage more than most.
Lenders are still restricting many of their deals to those with large deposits, with many of the most competitive rates only available to those borrowing up to 75% of the property's value. For example, Co-operative Bank has the leading three-year tracker at 2.39% but it is only available to those with a deposit of 25% or more.
This is more than many first-time buyers can afford to put down, so not only is the number of mortgage deals available to them even more limited, they are also precluded from the best rates.
Those with 5% of the property value would be offered just a handful of deals - and interest rates are steep. Top of the tables is currently Yorkshire Bank's two-year fix at 6.99% with a £599 fee - this compares with HSBC's market-leading two-year fix at 2.94%. The problem is, in order to qualify for the HSBC deal, you need a deposit of 40%.
First-timers with a 10% deposit will benefit from slightly more choice, such as HSBC's lifetime tracker priced at 4.59% or Clydesdale Bank's two-year fixed rate charged at 5.99%, both with arrangement fees of £999. But it pays to remember that lenders will also require a squeaky clean credit record.
Therefore, if you are hoping to get onto the property ladder, it's well worth trying to scrape together as big a deposit as possible.
Shared ownership and shared equity
There are a number of schemes designed to help people onto the property ladder.
If you have a combined household income of £60,000 or less, the Government's HomeBuy schemes could make saving a deposit a whole lot easier. This is because it would only need to be against a proportion of the property value. There are five kinds of HomeBuy scheme available that work either on a shared ownership or shared equity basis.
Shared ownership is where you take a conventional mortgage of between 25% and 75% of the property value, and a local housing association buys the remainder. You will be required to pay an 'affordable rent' on whatever part of the home you don't own and are then given the option to buy back chunks as and when you can afford to - a process known as 'staircasing'.
The schemes that work on this shared ownership basis are Newbuild HomeBuy, which applies to a proportion of all newly-built developments, and Social HomeBuy, which allows existing housing association and local authority tenants to buy their current home at a discount.
Shared equity is where you take an equity loan on the part you can't afford to buy. Usually this loan is a 30% stake in the property - 15% of which is stumped up by the Government and 15% from the developer. The remaining 70% loan is offered from a limited range of standard mortgage lenders, such as the Nationwide and Yorkshire building societies. When the property is sold, the proportion of equity the loan represents is repaid.
Schemes that work on a shared equity basis are HomeBuy Direct and Open Market HomeBuy. The latter, however, which incorporates MyChoice HomeBuy and Ownhome schemes, has run out of funding for 2009 and 2010. You may also find that other schemes are not available in your particular area but your local HomeBuy agent - the starting point for all schemes - will tell you. You can find details on the Homes & Communities (formerly the Housing Corporation) website.
The fifth scheme, called Rent to HomeBuy, allows qualifying applicants - again, priority first-time buyers with a household income of less than £60,000 - a 20% reduction on market rent for up to five years on selected new-build homes. This is designed to give tenants the time and opportunity to save for a deposit.
Guarantor mortgages
If you don't qualify for a Government scheme, your parents may be able to help instead, by way of a guarantor mortgage. These mortgages literally use your parents' salary to boost your affordability - although you will still need to find a deposit. Parents will be required to sign a legal document declaring that they are a backstop if payments are not met, but will not officially 'own' any of the property.
As this is a low risk strategy for lenders, many will apply a guarantor facility across a range mortgage deals. However, the vast majority insist that parents' income should qualify for the entire mortgage rather than just the slice they are guaranteeing. It's also worth bearing in mind that parents' existing liabilities, such as their own mortgage, will be factored into the lender's sums and that they will be 'jointly and severally liable' for the entire loan.
Don't panic
Even first-time buyers with no access to help shouldn't panic. While house prices might now be bumping along the bottom, they are unlikely to soar again any time soon. And interest rates - at their current 0.5% - are also predicted to stay low for at least another year. This combination is likely to hold the property ladder steady long enough for you to climb the first rung as and when you are willing and ready.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
