95 per cent loans? Pro­ceed with cau­tion

Evening Standard - West End Final Extra - ES Homes and Property - - News - Find Ruth Bloom­field’s full story at home­sand­prop­erty.co.uk

FIRST- TIME buy­ers who scram­ble on to the hous­ing lad­der only by tak­ing on a huge mortage face a fu­ture in neg­a­tive eq­uity, ac­cord­ing to re­search pub­lished to­day.

Build­ing so­ci­eties are in­creas­ingly of­fer­ing 95 per cent mort­gages to young buy­ers who are struggling to raise the huge de­posits re­quired to se­cure a starter home. Lat­est into the fray is the York­shire Build­ing So­ci­ety, which is of­fer­ing buy­ers with a five per cent de­posit a 3.25 per cent in­ter­est rate fixed for two years.

The av­er­age price of a flat in the cap­i­tal is mov­ing in­ex­orably to­wards the £400,000 mark. Ac­cord­ing to Halifax, it’s cur­rently £398,038, so buy­ing an av­er­age flat would mean rais­ing a de­posit of some £20,000 and pay­ing £1,843 a month to ser­vice the debt, as­sum­ing a 25-year re­pay­ment mort­gage is taken out. That fig­ure will rise with bank rate in­creases. And af­ter two years the York­shire Build­ing So­ci­ety rate will grow to 4.74 per cent, push­ing monthly costs for an av­er­age flat up to £2,154.

Mean­while, new re­search from Knight Frank is gloomy on cap­i­tal growth, fore­cast­ing a be­low-in­fla­tion one per cent rise in house prices this year, 2.5 per cent next year, and three per cent in both 2019 and 2020. Ex­perts warn this “per­fect storm” of in­ter­est rate rises, high lev­els of lend­ing and moul­der­ing prices could trap own­ers in homes worth less than they paid for them.

£400,000: an ul­tra-mod­ern one-bed­room flat is for sale in Three Colt Street, a hand­some listed pe­riod con­ver­sion in Lime­house E14 Through Fine & Coun­try (020 7987 8777)

£400,000: just over the Lon­don av­er­age flat price, a twobed­room flat in Telford Ave, SW2. Brooks (020 8769 8000)

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