Deposit is the biggest issue for first-timers

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JOHN PHILLIPS, FINANCIAL SERVICES DIRECTOR, KINLEIGH FOLKARD &HAYWARD

The advent of higher LTVs is a welcome addition to the mortgage broker proposition. It signals a growing confidence among lenders about the future of house prices and the prospects of lending to disenfranchised groups such as first-time buyers.

But LTVs are only part of the solution. For many the real difficulty isn’t so much the affordability of a loan as the size of the deposit required.

The increase in the required deposit is largely the result of tighter lending criteria, but it also reflects falling average incomes and the bigger trend of an ageing population locking up liquidity as people live longer.

Deposit requirements are preventing buyers from entering the market when the affordability element of the mortgage is not a problem for them.

This may not appear to be too problematic in the current risk-averse climate where buy-to-let is taking up much of the slack but no market should pin its hopes on one sector.

The long-term effects of locking out first-time buyers will be profound for the growth of the market and the economy. Housing constitutes such an important part of our economic well-being that ignoring this issue will simply store up problems for policy makers further down the line.

With so many demand and supply side dependencies in the home financing equation, it is optimistic to assume that the first-time buyer agenda will win out without support from other parts of the industry.