It shouldn’t be this difficult to own my own home

By Kate Groucutt / @kategroucutt

The fall in house prices over the last year has meant that many people, my partner and I included, can now realistically consider buying a home. However, the problem remains that whilst there are properties which we can in theory afford, it is still extremely difficult to get a mortgage. This lack of access to credit risks extending the economic downturn and undermining young people’s faith in the Government’s recovery plan.

We want to buy our own home not as an investment or a way of making money, but as somewhere to live. It would give us control over our own surroundings and a stake in the community in which we’ve lived for three years. It would also have tangible benefits like being able to improve the building’s insulation to reduce our energy bills, something which our landlord currently has no incentive to do.

Last week we found a flat we liked in a newly completed development. Before putting down a holding deposit, we spoke to the bank to confirm that the mortgage we had previously discussed was still available. We have managed to save enough for a 10% deposit and there are now a range of mortgages available on this basis. But, no, we were told that for a new build flat we would require a 25% deposit. This is completely out of our reach, as I’m sure it is for most first time buyers. It is based on a perceived higher risk of negative equity for newly built flats, regardless of the location, price or any other features of the flat in question. Yet if we were buying a new build house (a rare thing in London) or a crumbling old property a street away, our 10% would have been fine. This extra barrier for people buying new build flats is surely hurting the companies developing these properties, and I’m sure will result in some flats going unsold when people are desperate to live in them.

To try and make up the difference, we approached the Government funded scheme Own Home which gives a contribution of 20-40% of the value of the home on an interest free basis for 5 years. It is aimed at first time buyers, yet we were told that we would need to wait 10 weeks just for an eligibility interview, hardly ‘real help now’.

The market seems to have swung from excessive availability of credit to extreme caution, yet this has clear knock-on consequences for the wider economy beyond the building trade. We hope we will be able to buy a place eventually, but it will take much longer than we first thought as the goalposts keep shifting and we have had to rule out a whole category of properties. This means a delay to the business we’ll give the van driver who we’ll hire to help move us, the sofa and cooker we’ll buy, the several thousands of pounds in stamp duty we’ll pay the Treasury, plus the estate agents, solicitor and everyone else who’ll make money through the sale.

Our main frustration is about the rigidity of the rules imposed by the banks and the lack of help available. As taxpayers who currently make very little claim on public services, we thought the least we could expect from our publicly backed banks would be fair policies and consistency. Of course they need to be careful with public money, but this should be based on an assessment of our creditworthiness and the value of the property we are looking to buy, rather than a blanket policy. Those of us who have saved and want to buy a property within our means are being punished compared to those who bought a few years ago with 100% (or more) mortgages.

So despite the fall in house prices, there is as big a divide as ever between the 59% of Londoners who are homeowners and the rest of us. The divide is yet bigger when you factor in mortgage rates. Many existing mortgage holders are benefiting from low interest rates, where as we will be facing interest rates of 6% even if we can get together the deposit required.

Negative equity and repossession are real risks for thousands of families and Government must do what it can to help, but first time buyers mustn’t be forgotten. For young people looking to buy their first place, or families in need of more space, it is crucial that the market keeps moving. Government must get the banks lending again and expand schemes like Own Home and other forms of shared ownership.

Not only will this stimulate local economies and generate tax revenue, but it will convince first time buyers that Labour is the party which will help them achieve their aspiration of owning a home.