Recent research suggests that 20% of first time buyers were unable to find a suitable contractor mortgage in 2011.

The study from the UK Mortgage Council also discovered that more than one in four prospective first time buyers would only have enough money for a 5% deposit, while 28% believed they had enough savings for a 10% deposit.

CML data released towards the end of last year showed that first time buyer deposits averaged 20%.

RFi analyst Anna Spivack said that low deposit products are available from some building societies that offer 95% LTV mortgages to first time buyers. However, although there are products available, first time buyers without a large deposit are faced with a more challenging environment than those who bought in previous years simply because of the current turbulent economic climate.

The UKMC study found that 29% of first timers wanted a home loan of between £100,001 and £150,000, whilst slightly more than one in five wanted a mortgage between £50,001 and £100,000. Less than 5% had set their sights on a mortgage of between £250,001 and £300,000.

Spivack went on to say that these figures are reasonable considering current UK house prices, but they do explain why the majority of first time buyers expect to get a mortgage of at least 90% LTV. Nearly 60% of prospective first purchasers earn a maximum of £30,000 a year and trying to save £35,000 as a 20% deposit for a £175,000 home would be impossible for many of them.

How indicative the UKMC’s figures are on the real state of the first time buyer market in the UK could be in doubt as the group only surveyed 333 prospective property owners.

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There hasn’t been much good news to shout about in the housing market recently, but a glimmer of hope has crept in after the CML announced that mortgage lending increased in November.

The number of people taking out a fixed rate contractor mortgage in November was the highest seen for more than two years. 65% of the 47,000 mortgages taken out were fixed rate deals as borrowers took advantage of the good deals available. The Post Office and Nationwide are amongst the providers to have slashed the rates on their fixes as the Bank of England base rate remains at 0.5%.

Despite November’s increase, Howard Archer from HIS Global Insight explained that the UK’s housing market is still low and will probably come under further pressure this year. He expects house prices to fall by as much as 5% as the market is weighed down by rising unemployment, weakened economic activity and low consumer confidence.

First time buyers took out 17,300 mortgages worth a total of £2.1 billion in November. In November 2010, the typical first timer spent 13% of their income on mortgage interest payments. By November 2011, this had decreased to 12.2%.

The CML remarked that although we have seen a significant decrease in the number of first time buyers since the start of the recession, the proportion of mortgages granted to them has stayed reasonably steady. Last November, 37% of all mortgages went to first timers. There was also a 2% year on year increase in the number of mortgages granted to people moving home.

Paul Smee, the director general of the CML, expects to see first time buyer activity increase in the short term as purchasers rush to complete before the stamp duty holiday ends in March.

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According to a new study, first time buyers in Scotland pay a lower proportion of their earnings towards their contractor mortgage repayments than people in other parts of the UK.

In the final quarter of 2011, Scottish borrowers spent an average 20% of their income on their mortgage payments compared to 27% in the rest of the UK. Over the past 27 years, the average mortgage payment for first timers and those moving home was 30% of income.

The research from the Bank of Scotland showed that East Ayrshire was the most affordable UK local authority. A typical mortgage in the area would cost the buyer 15.7% of local average earnings. North Ayrshire and West Dunbartonshire followed close behind with 16.2%.

At the other end of the scale, a typical buyer in Edinburgh forks out an average 26.2% of local earnings on his or her mortgage payment.

However, Dr John Boyle from Rettie & Co said the housing market north of the border was still suffering. Affordability has been boosted by falling house prices and lower mortgage rates but high deposits and stricter mortgage lending criteria have made it harder for first time buyers to get a foot on the housing ladder.

Bank of Scotland housing economist, Nitesh Patel, explained that mortgage payments for new borrowers in Scotland now take up the lowest proportion of earnings for almost ten years. If, as is widely expected, the Bank of England keeps the base rate at its historic low throughout 2012, affordability should remain favourable this year.

Mortgage payments across the UK have nearly halved since 2007 when they accounted for 48% of income. Buyers in Greater London however still spend 35% of their income on their mortgage and those in the South East spend 33%.

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Confidence in the British housing market is the lowest it has been for over a year as fewer contractor mortgage holders expect to see house prices increase in the next few months.

The most recent Housing Market Sentiment Survey from Zoopla.co.uk shows that only 55% of homeowners think that residential property prices will increase in their local area in the next six months. Three months ago, the figure was 59%.

Those who do expect property prices to rise during the first six months of 2012 predict the rise will be just 2.2%.

Homeowners still believe their property is a cut above the rest and will outperform the average. Despite predicting an average 2.2% increase for other homes in their locale, they expect their own home to increase in value by 2.8%. 29% of the survey’s respondents expect local house prices to fall but when it comes to their own property, only 24% expressed that sentiment.

Homeowners in the capital continue to buck the trend with 72% of residential property holders expecting to see house prices rise in the first half of 2012. Owners in London have predicted that house prices will increase by 4.7% in the first six months of this year.

48% of those surveyed said they will only believe the property market is improving when it becomes easier to obtain a mortgage, whilst just 11% of those surveyed believe mortgage availability has improved in the last three months.

Nicholas Leeming from Zoopla.co.uk said homeowner confidence has been battered by the general economic uncertainty. We are unlikely to see confidence return to the housing market until the economic outlook improves.

However, the housing market in London continues to be detached from the rest of the country. Overseas investors are still buying properties in the capital and this has led to increased prices and confidence levels for Londoners.

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According to ARLA, an increasing number of householders are putting their homes up for rent because they are unable to sell them.

During the third quarter of last year, 47% of the surveyed ARLA member agents reported an increased number of unplanned lettings as homeowners turned to the private rental sector. At the beginning of 2011 the figure was 40%.

In the North East and North West, more than 60% of agents reported that more people were entering the rental sector because they were unable to sell their property. The same was true in Northern Ireland, Scotland and Wales. At the other end of the scale, only 17% of agents in London reported an increase in reluctant landlords.

Tim Hyatt, the president of ARLA, said letting a home might be a good way to generate a consistent income if prospective landlords adopt the right approach. But he warned that there are potential pitfalls for both side as the letting industry is unregulated.

Strict mortgage lending requirements, falling house prices and economic turmoil in the Eurozone have meant that people moving home for business purposes have been struggling to sell their property, and renting it out could be the only way they can afford to relocate. Reluctant landlords are most likely to bring detached and semi-detached houses onto the rental market, according to ARLA.

However, prospective landlords should contact their contractor mortgage provider and insurer before they rent out their property because the terms of their contract might need to be amended.

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According to the Royal Institution of Chartered Surveyors, house sellers are becoming greedy and asking unrealistic prices.

The RICS said that the number of new instructions increased for the third consecutive month in December. The biggest increase in supply came from London, where new instructions rose to the highest level in nearly seven years. However, despite the number of new inquiries from buyers increasing slightly, expectations for future sales are flat due to unrealistic pricing from some vendors.

The latest RICS survey shows that house prices continued their downward trend albeit at a slower rate than in previous months. The only area to experience a rise in prices was London, whilst Humberside and Yorkshire and the West Midlands suffered the largest falls. 21% of the surveyors questioned expect house prices to fall further in the next three months.

Ian Perry, an RICS housing spokesman, said a lack of supply had been a major problem in some areas of the UK so it was pleasing to see more sellers entering the housing market in December. However, sellers must set a realistic price if they have any hope of selling their property within a reasonable timeframe.

The continuing turmoil in the Eurozone is likely to deter prospective buyers over the coming months and strict contractor mortgage lending criteria will prevent many prospective first time buyers obtaining the home loan they need.

Despite the economic gloom that heralded the end of 2011, sales activity managed to hold up reasonably well with average completions of 15.2 per surveyor for the final quarter of the year.

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Contractor mortgage seekers will be aware that house prices throughout the world have been affected by the global economic crisis but while people in the UK may think they’re suffering badly, things are even worse in countries like Ireland and Spain.

The world’s major housing markets registered a 1.5% rise overall in the third quarter of 2011. That’s the weakest increase since Q2 2009 and experts are now concerned that the next Global House Price Index from Knight Frank will reveal negative results.

Ireland saw house prices drop by more than 14% year-on-year in Q3 last year. Prices in Cyprus dropped by 6.6% and the decrease in Spain was 5.5%.

At the other end of the scale, house prices in Hong Kong increased by almost 20% annually. The Estonian housing market rose by 14%, while France saw prices rise by 6.7%.

Ireland is now propping up the bottom of the Global House Price Index league table with -14.3%, followed by Russia at -10.7% and Ukraine at -8.4%. At the top, Hong Kong and Estonia are followed by India, where prices rose by 13.9%, Taiwan by 12.7% and Slovenia with an annual house price increase of 9.0%. The UK comes in at number 30 with a decrease of -0.5%.

Between 2004 and 2007, housing markets around the world were recording double-digit annual growth. Those times are long gone. This latest index reflects prices in the third quarter of last year, before the Eurozone crisis peaked. The fourth quarter index will reflect the full impact the crisis in Europe has had on global house prices. It may not make pretty reading!

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Whilst first time buyers looking for a contractor mortgage have not yet fared quite as badly as the Dodo, in some parts of the UK they are increasingly becoming an endangered species.

According to a recent report, the East Midlands is one of the worst regions for first time buyers hoping to buy a home. Prospects for the next 12 months do not look good and the average UK earner would need to save for more than ten years to have enough money for a deposit. In the East Midlands, the average is 15 years.

A survey by InvestorBee discovered that a lot of first time buyers in the East Midlands don’t seem to grasp the reality of the situation. 27% of those who are saving for a deposit hope to buy a property this year, and 29% expect to be in their own home within two years. None of the survey’s respondents said they would save for longer than ten years in order to secure a deposit.

The average salary of a first time buyer in the East Midlands is £23,431. Even if they saved 9.3% of their income, it would take 15.6 years to save enough for a 20% deposit. House prices in the region currently average £169,411.

December’s first time buyer forecast from Rightmove suggested that only 18.4% of purchasers in the East Midlands this year will be first timers. The national average is 23% and puts the East Midlands in second last place. The South West has the lowest percentage of prospective first time buyers.

Rightmove’s survey also discovered that the average age for a first time buyer in England and Wales this year will be 32.

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Buy to let residential property investors are emerging as winners as the mortgage famine forces more and more people into renting rather than buying.

Savills estate agent has reported that private landlords now own nearly 20% of the UK’s housing stock.

Contractor mortgage lenders began tightening their lending criteria when the economic crisis began and although this has prevented a lot of first time buyers getting their first foot on the housing ladder, buy to let landlords have been able to take advantage of new opportunities. Investors are no longer lured by the promise of rising house prices; instead increasing rental income attracts them.

The CML says buy to let landlords received £3.8 billion in mortgage funding in the third quarter of 2011- a rise of 16%.

However, despite the tightened mortgage lending criteria, home loan approvals increased to 52,854 in November; up from 52,786 the month before. Of course, this figure is still well below the monthly average of 88,000 seen in 1993, but it is reassuring to see that the Eurozone crisis is not having as bad an impact as some might have expected.

The number of approved remortgages in November dropped from 34,004 to 31,154, the lowest amount since June 2011.

Samuel Tombs from Capital Economics pointed out that mortgage lending is going to be weighed down by the threat of a double-dip recession over the coming months. Mortgage approvals may start to fall again as banks increase the cost of lending in response to the deteriorating conditions in the wholesale funding markets.

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The Bank of England had some distressing news for contractor mortgage seekers last week when it said that it was about to get harder to obtain a home loan.

The BoE produces a quarterly mortgage lending activity survey and the latest one shows that lenders are expecting to tighten their credit scoring criteria in the coming months. Hardly surprisingly, lenders are concerned about the poor state of the UK economy and falling house prices.

The latest survey showed that lenders expect to approve a lesser proportion of mortgage loan applications and some lenders said they had revised their figures for calculating affordability. This strategy has already deterred a lot of potential purchasers from applying for a first time buyer mortgage.

Mortgage rationing has been in place since the onset of the global economic crisis in 2007. Lenders no longer had a ready supply of available funds for mortgages and house prices started to fall. Lenders also started to demand deposits of between 20% and 25%, which effectively put home ownership out of the reach of many first time buyers.

These factors have all contributed to the stagnant housing market we see today. And it now appears that worse is still to come.

The only good news to come out of the survey is that mortgage defaults are on the decrease and this trend is expected to continue over the next few months.

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People with a contractor mortgage in Bristol might be interested to learn that the city’s housing market is outperforming many of the other UK regions. The average price of a residential property in Bristol is now £224,982.

Nationwide’s latest research shows that property values in Bristol increased by 4% in the final quarter of 2011 when viewed against the comparable period of 2010. This might seem like a small increase when you consider the speed at which house prices rose during the housing market but, but following a 3% increase in quarter 3, Bristol is now one on the best-performing provincial cities in the UK.

House prices in Bradford rose by an astonishing 10% last year, followed by Cambridge at 7% and Bath at 5%. London, with a house price increase of 7%, is treated as a region rather than a city in Nationwide’s table.

An increase in house prices is obviously good news for existing property owners, but for struggling first time buyers it provides little comfort.

Robert Gardner, the chief economist at Nationwide, said that although the housing market did not put up a strong performance last year, house prices did not suffer too badly despite weak economic growth and rising unemployment.

However, he went on to point out that mortgage approvals were still well down on the boom days and demand and supply were both weak. The weakness in both demand and supply ensured that prices did not move strongly either up or down. Gardner expects this year to be much the same as last and if economic conditions deteriorate buyers could be put off entering the market.

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The housing market divide between the north and south of the UK is now at its widest point for more than ten years and it is expected to grow even further.

47% of the total value of all house sales in England and Wales can be attributed to the South East and London. In 2000, house prices in the South of England had seen five years of rapid growth leaving the North lagging behind.

However, Lucian Cook, one of the directors at Savills, says the current gap reflects the North’s reliance on public sector employment and its higher dependence on contractor mortgage funding.

Mortgage lending institutions are granting fewer home loans and only 46% of all housing transactions are mortgage funded. The primary source of funding has become equity due to the high deposit requirements laid down by lenders. Furthermore, whilst house prices in the north have been dropping, those in the south have continued to generate significant equity.

Mr Cook says the first quarter of 2008 was the turning point. Once the recession started to bite and the clampdown on mortgage lending started to constrain the market. The London housing market has continued to benefit from rich foreign investors but the recession had a significant impact on housing sales in all but the most expensive property brackets, he added.

Figures from the ONS suggest that average property prices have dropped by £9,000 since 2007 and the average home is now worth £195,000.

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