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First-time buyers living in fear of mortgage overload.

Byline: By Tryst Williams and Jenny Rees

Nearly one in four first-time buyers are worried they will not be able to keep up with their mortgage repayments, new research claimed today.

About 22% of people who bought their first UK property during the past 12 months said their biggest fear was becoming so overstretched they would not be able to meet their monthly mortgage payments, according to research by Alliance & Leicester.

In Wales the figure was 14%, or one in seven first-time buyers.

The fears are seen as a direct response to the still-buoyant housing market, which has left first-time buyers stumping up bigger deposits, signing up for bigger mortgages or compromising on their choice of house.

The research showed that around 7% of buyers and 10% of recent homeowners are also worried that they will not be able to afford to pay for maintenance on their new home because they are so overstretched.

Just over a third of people are also concerned they will end up panic buying a house just to get a foot on the property ladder, while 12% of people who recently bought a home said they think they may have made a rash purchase.

Paul Cooper, head of mortgages at Alliance & Leicester, said, 'While some buyers may feel pressure to buy their first home, they should ask themselves two questions - can they afford it and do they want to live there. If they stick to these two basic questions they won't go too far wrong.'

Melvin Williams, of Williams and Goodwin Estate Agents in North Wales, and president of the National Association of Estate Agents, said, 'First time buyers are overstretching themselves.

'The crunch will come if they are on variable rates and the rates go up.

'An increase of 1% or 2% could mean a 25% increase in their monthly payments and that could tip the scales.

'This is why it's important interest rates stay pretty consistent for the next 18 months. We are expecting small rises over the summer and later in the year.

'We shouldn't hit the panic button but a word of caution should go out to young people.'

The interest rate set by the Bank of England stands at an historically low 4% although many analysts predict a rise to 5% over the next 12 months.

Michael McGuire, business development director with the Principality Building Society, believes a rise in rates, coupled with already high house prices could cause further pain for Welsh first time buyers.

Last year, the cost of the average house sold in Wales topped pounds 100,000 for the first time.

Mr McGuire said, 'It's a double squeeze on first-time buyers and it does feel like a bad place to be.

'First time buyers have found it difficult and there are fewer out there. Rising house prices are hurting them.

'They need to live somewhere and, in Cardiff's case, more have gone into rented accommodation or moved outside the capital because prices are more affordable.

'London's had this problem for 20 years but now we're seeing it in places like Cardiff, Swansea and Newport.

'But I don't think houses are less affordable than they were in the early 1990s when interest rates were two to three times higher.'

The research also found that 29% of first-time buyers are worried pressure to get on to the ladder will cause them to buy an 'unsuitable' home.

Carey Jones, managing director of Cardiff and Barry- based estate agents Knights, said, 'I think there's a huge feeling in this country you've got to be on the property ladder and buyers are accepting houses that need work doing or are in an area that isn't so good.

'The classic first-time buyer properties are being snapped up - but not by first-time buyers.

'They are being squeezed out by investors and lots of people are buying-to-let, which is huge compared to four or five years ago.'

But despite the fears and problems faced by first-time buyers, building society repossessions were carried out on just 0.07% of all UK home loans in 2003.

Bernard Clarke, a spokesman for the Council of Mortgage Lenders, said, 'People are expecting interest rates to rise and first-time buyers need to factor that into their plans.

'If any buyer is worried about entering the market then fixing the rate is a way of side-stepping the problem.

'Anybody who is finding difficulty meeting their repayments should discuss their problem with their lender as soon as possible - there is a range of options they can explore.'

Home and dry :Careful planning means Natasha Lobley has had very few hiccups in her first year as a homeowner.

But if disaster strikes and the boiler goes, she says she'd have to call in the parents for financial assistance.

Miss Lobley, of Bridgend, admits there was some pressure to get on the property ladder.

'I could see that house prices were rising each month and the longer I left it the longer I would be stuck in the same position,' said the 26-year-old who works in public relations.

'But I knew I had to be sensible, so I sat down with a chartered surveyor to see what some of my options were and what steps I should take. Because I found one through the Royal Institution of Chartered Surveyors I knew I could trust what I had been advised.

'Before I committed to buying I rang the water board and Swalec and figured out how much I would be spending on food and phone bills - but there are always little things that you forget.'

Miss Lobley opted for a fixed rate of interest for the first three years as she was aware that friends of her parents had been stuck with negative equity in the past on their variable rates.

She then opened a new bank account to pay for the utility bills so that she could clearly see how much of her salary was left over.

But she admits that saving for a rainy day is difficult, and if the worst were to happen she would be forced to call on her parents for help.
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Copyright 2004 Gale, Cengage Learning. All rights reserved.

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Publication:Western Mail (Cardiff, Wales)
Date:Feb 21, 2004
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