Large deposit requirements keep first home buyers out: UK

Mortgage market activity improved strongly in the United Kingdom in March 2009, as borrowers took advantage of the lowest debt servicing costs in years but a crack-down on loan to value ratios is keeping those without deposits out.

Council of Mortgage Lenders (CML) revealed that the number of mortgages approved for house purchases jumped by 29% in March 2009.

While borrowers in the UK are still in need of large deposits to enter the market, and overall lending remains constrained, the CML said buyers were taking advantage of the lowest interest rates in five years.

The number of first home buyers climbed by 35% compared to February 2009, but in contrast to Australia, first home buyer numbers remain significantly down on the same time last year – most likely as a result of higher loan to value ratios.

"Because the flow of lending is still constrained, there is a sharp dividing line in the housing and mortgage markets between those who can raise a substantial deposit and those who can't,” commented CML head of research Bob Pannell.

"For those without substantial deposits, entering the market is still both difficult and uncertain.”