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Attitude problem

Lenders need to rethink how they treat first-time buyers, who are in their 30s before they have saved a deposit

I bought my first home – a one-bed flat in East London – when I was 25. The only reason I could buy when I did, with a 25 per cent deposit, was because I had been made redundant from my job on a national newspaper.

The generous redundancy package provided my downpayment and all I had to ask my parents for was their opinion as to whether they thought I should buy the flat or not.
So much has changed in the 12 years since then. New research from the Post Office shows that most first-time buyers are resigned to not being able to buy their first place before the age of 35. The main reason for this pessimism is the lack of a deposit.

Lenders are offering more deals to those with modest deposits but saving up the minimum 5 or 10 per cent is still tricky, especially with static salaries, rising rents and other living costs and student debts to pay off.

Even if you can drum up 5 or 10 per cent of the purchase price, there is the big issue of tougher credit-scoring for those with small deposits. And then even if you do pass the credit score, you must pay a higher rate of interest because the lender will regard you as more risky than someone with a 25 per cent deposit.

By the time I was 35, I was on my fourth property, with a buy to let or two thrown in for good measure (including that first flat, which I hope to give to my son – who has just turned two – when he wants his own place).

I have been lucky. Rising property prices have enabled me to climb the housing ladder, settle down and have a family (baby number two is on the way).
But if I could not buy my first place until I was 35, I daresay my life would have been quite different.

Although across continental Europe, families are happy to rent for many years without ever buying their property, here it is rather different.

I would not feel settled until I owned the roof over my head (admittedly, with a little help from the bank). It would put me off having children because life would feel much more transient if we were at the mercy of a landlord who could put the rent up without much notice, decide he/she no longer wanted to rent to us or stop paying the mortgage, leading to the horror of “our home” being repossessed.

This delay in homeownership for many is likely to have a profound effect on society, with many people putting off having children until they feel more settled. But does it really have to be this way? Why should first-time buyers – those who can least afford it – pay a significant premium on their mortgage rate?

Lenders worry about the risk of those with small deposits defaulting on their mortgage. But are those who have scrimped and saved 5 per cent of the purchase price more likely to hand over the keys and walk away when times get tough than someone with a 25 per cent stake in the property?

I would argue not, as the effort that would have gone into getting that deposit together should not be underestimated.

Melanie Bien is director of Private Finance

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