Many first-time buyers are seeing their property deals fall through because they cannot get a mortgage and should be given more help, it has been claimed.
Some 38% of would-be first-time buyers are trapped in the rental market because they cannot get a big enough deposit together to meet lenders’ criteria, according to the Royal Institution of Chartered Surveyors (RICS).
About one in five people who had tried to get on the property ladder had seen their potential purchase fall apart because of difficulties in accessing mortgage finance, the study said.
The government has attempted to solve this problem by launching the NewBuy initiative, which encourages lenders to provide mortgage deals for people with a deposit lower than 10% if they are buying a new-build property in England.
However, RICS believes some stagnant chains would be freed up if a similar scheme was introduced for first-time buyers looking to purchase second-hand properties.
Ministers should look to offer a “reasonable deposit” in return for a stake in the home they buy, providing the taxpayer and the government with a return on their investment, RICS said.
Some similar schemes currently exist, the group said, but they lack the power to kick-start the market and are too fragmented.
RICS suggestion follows a report from the British Bankers’ Association which found mortgage approvals had fallen to their lowest number in at least 15 years in June.
Mortgage approvals for house purchase fell to their lowest numbers since January 2009 and slumped to a fifth lower than a year ago.
RICS global residential director Peter Bolton King said: “Many first-time buyers are facing the prospect of a property ladder with no rungs.
“With lenders requiring such hefty deposits and affordable mortgage deals out of reach for most, a generation of potential homeowners are facing an uphill struggle.
“Without allowing more first-time buyers to enter the market, chains will continue to stall and transaction levels will stagnate.”
Lenders and estate agents said sales had been bunched up towards the end of the two-year stamp duty concession for first-time buyers, which ended in March, as people rushed to complete deals.
The National Association of Estate Agents (NAEA) said the proportion of sales made to first-time buyers fell to a seven-month low in May to 17%, far behind the “healthy” long-term 40% average.