Problems persist for first-time buyers

First-time buyers will continue to struggle to enter the housing market in 2004, according to reports out today.

The Council of Mortgage Lenders said in its mortgage lending report that only 26% of those who bought a house in November were purchasing their first property. Furthermore, in its house price forecast for 2004, Nationwide building society reported that only around 360,000 buyers were getting their foot on the property ladder for the first time in 2003, compared with more than half a million in 2002.

Because of the lack of first-time buyers on the market, house-buying chains were lengthened, with 4.4 buyers and sellers making up the average chain, compared with 2.5 in the 1980s.

Nationwide went on to predict that house price inflation would slow down in coming months, forecasting growth of 9% in 2004, compared with 15% in 2003 and a massive 25% in 2002. Abbey today announced it predicted an increase of 6%, while earlier this week HBOS, the group that owns Halifax, predicted house price increases of 8%.

"The housing market will carry considerable momentum into early 2004 and we expect house price growth to be biased towards the first part of the year," said Alex Bannister, group economist at Nationwide. "Later in the year, rising mortgage rates and slow income growth will dampen confidence. House price expectations are also likely to become more realistic, especially in the north where prices are currently rising at an unsustainable pace."

Prices in the north rose by as much as 29% in 2003 and 27% the previous year. Nationwide expects the rate in increase to fall back to 12% in that region.

Michael Coogan, CML director general, said: "Looking ahead, we expect house price inflation to remain active despite higher interest rates. 2004 will bring other challenges in the housing market, not least the conundrum of how to address the affordability problems faced by first-time buyers."