F is for first-time buyers

The Council of Mortgage Lenders says the average first-timer's deposit is £31,000 in London and £18,000 nationwide (up from £5,000 in 1997). New buyers now use unorthodox routes - many borrow from parents with big equity on houses that have rocketed in value, while others now buy for the first time with their siblings or friends.

Their difficulties lie with deposits and moving costs, because ongoing mortgage costs tend to be cheaper than rent, the CML says. Now the government, housing associations and even developers, who need new people on the property ownership ladder, have schemes to help.

First, the Starter Home Initiative is aimed at 'key workers' - usually nurses, teachers and police - who cannot afford homes near their work, especially in South-East England. SHI is based on a loan to pay the deposit, repayable when the house is sold.

Second, shared ownership is where a housing association and an individual jointly buy a new home on a mainly private estate. The individual owns at least 25 per cent and has an option to buy more as financial circumstances permit.

Third, some builders, such as Barratt, operate incentives that include paying stamp duty or legal costs on selected developments. Some also offer advice schemes, explaining how to buy and sometimes offering mortgages at preferential rates through links with certain lenders.

But a wider choice of lenders with better rates can be found through the internet or a mortgage broker, although check any fees involved. Do not over-stretch yourself and calculate your payments if interest rates were to rise by, say, 1 per cent. This year, some first-time buyers have bought caravan homes previously favoured by retired couples, or even canal boats, just to get on the ladder. One consolation is that they now form the largest sector of the house-buying market.

But there are success stories. Desiree Kongerad and Martin MacDougall, performance artists, were renting in south London when they contacted local housing associations to ask about shared ownership schemes.

Although they were not on council waiting lists nor in housing association property already, they called the Metropolitan Housing Association just as it was looking for share-buyers for a scheme in Streatham. They now live in a house worth £260,000. They own 40 per cent, their first home purchase. It can be done.

Top tips

Some lenders go the extra mile for first-timers. A 'rent-a-room mortgage' from Bradford & Bingley allows you to borrow more on the basis of predicted rent from letting out the spare bedroom in your new home. Scottish Widows offers a 110 per cent 'professional mortgage', aimed at young borrowers expecting a higher income after training schemes.

Contacts

Starter Home Initiative 020 7944 3626
Housing Association Shared Ownership schemes listed on www.housingnet.co.uk
www.barratthomes.co.uk
www.scottishwidows.co.uk
Bradford and Bingley