How The Credit Crunch is Affecting First Time Buyers

We have all heard recently about the so-called 'Credit Crunch' and the effect it is having on how we live and spend our money but the 'Crunch' is also having a knock on effect to first time buyers who want the opportunity to get onto that first rung of the property ladder.

What is the Credit Crunch?

The Credit Crunch is a financial condition whereby the country affected - in this instance the United Kingdom - has a shortage of money to lend to businesses and consumers and where interest rates and inflation are rising. At the present time in the United Kingdom the Bank of England has had to shore up bank reserves with an addition £50bn.

Am I Affected by the Credit Crunch?

The truth of the matter at the moment is everyone is affected by the credit crunch; from the big banking institutions to the working man in the street prices are rising, interest is rising as is inflation and the cost of living generally is continuing to rise which is in turn putting a strain on the salaries of those people further down the employment ladder. Also individuals who have converted bad debt into debt consolidation loans are also being affected.

If you have a family then you are probably paying higher utility bills as well as higher shopping bills and nearly everyone who drives a car or vehicle for work use is paying considerably more for their fuel than they were six months ago.

I Want to Buy a House, Will the Credit Crunch Affect Me?

Sadly yes it will. First time buyers at one time were able to take advantage of mortgages which were known as '100%' mortgages and there were even '125%' mortgages but they have all but been eradicated now because of an unwillingness on the part of lenders to be left with huge debts and repossessed properties they cannot sell.

I Don't Have a Deposit Will That Be a Problem?

It is now becoming difficult for anyone without a deposit to get a mortgage. As we detailed above many mortgage lenders did provide '100%' mortgages which allowed for those individuals who could not supply a deposit. With only a few lenders still being financially brave enough to offer a '100%' mortgage it is now very difficult to get a mortgage without a deposit. Sadly the only advice that can be offered in this instance is hold on until you have raised a deposit or ask a family member if they can lend it to you.

I Have Had Problems with Debt - Will This Stop Me Getting a Mortgage?

As much of the credit crunch is actually down to so-called 'bad credit mortgages' it is becoming almost impossible to get a mortgage if you have a bad credit history. The so-called 'Sub Prime' market which dealt almost exclusively with mortgages for individuals with bad debt suffered a huge blow and many lenders who bought and sold 'packages' of these mortgages lost out badly.

However if you have a deposit of between 15% to 20% then you may still have a chance.

Seeking Advice

It is recommended that you seek the advice of an independent financial advisor before attempting to undertake or apply for any sort of mortgage. He or she will advise you as to how best to proceed and may even be able to recommend a way for you to get onto the housing ladder. It may even be worth looking at a 'Rent to Buy' option initially rather than taking on a full scale mortgage.