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Financial Health

While many people have benefited financially in the current housing market boom, there is a growing awareness that first-time buyers could be classified as an endangered species as they find it increasingly difficult to step onto the UK housing ladder.

With the National Institute of Economic and Social Research reporting that housing price growth will slow to single digits, rather than suffer an early 1990s-style crash, and with rising interest rates and student debts, we have a combination of factors that do not engineer a favourable scenario for this essential group of mortgage customers.

But have we seen an end to the historical numbers of first-time buyers? Mortgage lenders certainly do not think so and it is good to see the level of innovation in products coming to the market. But there are some alarm bells ringing.

With first-time buyers being forced to become more resourceful to take that first step, do we risk seeing a return to the days of double MIRAS tax relief when properties were purchased by partners and friends on the back of market conditions rather than on solid, strong and long-term relationships? In a slowing market, I am concerned that buying decisions on the basis of what seemed a good idea at the time may end up causing more problems and unmanageable costs as personal circumstances change.

Although MIRAS offered considerable tax relief, when a relationship broke down the outcome often saw either one of the parties with an unmanageable financial burden or with both parties with future financial problems to address.

There are also signs that we could be pushing the problem elsewhere. Most parents would do whatever they could to help their children, but the use of their retirement income or the release of equity in their own properties to fund a deposit could have a detrimental effect on their own financial situation. Despite the hardening market for first-time buyers, they are not a thing of the past. They are critical to a stable and fluid housing market and we must continue to work on initiatives that reduce their start-up costs and encourage them to enter the market in a way that they are able to cope with their new commitment.

The industry has an obligation, however, to ensure that it doesn&#39t create the same problems we saw in the early 1990s. Education must be part of this process as it is essential that first-time buyers understand the mechanics of the housing market and the obligations associated with home ownership.

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