The property market is bouncing back

A quick look at recent headlines suggests this is indeed the case. But dig a little deeper and you'll find there isn't good news for everyone.

Halifax and Nationwide have both recorded rises in sales over the past few months, while website Rightmove says confident sellers have been upping their asking prices since the start of the year.

Mortgages, apparently, have become not only cheaper, but also more abundant. Last week, the Council of Mortgage Lenders announced that home-loan repayments were at their lowest levels, as a percentage of earnings, in five years.

Meanwhile, brokers have reported improvements in mortgage deals, and a greater "willingness to lend" among banks.

But relying on headlines to give you the complete picture is never a great idea - and that goes double for the housing market in 2010.

The haves and the have-nots

What these stories do not reveal is that Britain is turning into a nation of haves and have-nots when it comes to bricks and mortar.

It's true, there has always been a gap between those who own their own homes and those who do not - and in recent years, it has certainly not been easy to take that first step on the housing ladder.

But at the moment, potential first-time buyers are being marginalised like never before.

Whatever the banks and advisers say, if you do not already own a property, you are likely to find it very difficult to get an interest rate you can afford on a new purchase.

First-time buyers

Yes, there are a lot of new mortgage deals coming on to the market after the drought of the last couple of years. But competitive loans are pretty much always limited either to existing borrowers, or to those capable of putting down a huge deposit, usually at least 30% of the property price.

On a property worth £200,000, this would mean finding £60,000 security as a minimum. Good luck to you if you've managed to save up that much: but very few first-time buyers are likely to have done so.

HSBC has just launched a lifetime tracker, that will remain at 1.99% above the base rate - but this is only available at 60% loan-to-value, which means you will need to put down a deposit of 40% if you're making a new purchase.

In reality, the only people who will be able to take advantage of an offer like this are those who have been property owners for at least a decade, having built up a substantial amount of equity.

First-time buyer deals

So what is on offer for first-time buyers? If we look at 90% LTV deals, where a deposit of just 10 per cent is needed, the news is pretty gloomy.

One of the least bad deals is with Santander, which has a tracker loan at 4.49% above the base rate, which equates to 4.99% today.

That might not sound unmanageable - but imagine what would happen if the base rate started climbing again.

If rates returned to 5%, which is where they were less than two years ago, the interest rate on your loan would soar to 9.5%, with your monthly repayments increasing by half.

True, most pundits don't envisage the base rate making much upward movement in the near future. But is that a risk you really want - or can afford - to take?

For those with low deposits, fixed-rate loans start at 6%: given the base rate of 0.5%, you would be forgiven for thinking this was extortionate, but with this type of mortgage, at least you won't be vulnerable to rate increases.

When the CML talks about the size of mortgage repayments falling to historic lows, they are referring by and large to those property owners who took out loans before the credit crunch struck. Many will be paying next to no interest if they were insightful enough to have signed up to a tracker.

Even those who have reverted to their lender's standard variable rate are unlikely to be paying much more than 3% interest.

But this is cold comfort for those yet to buy.

Clearly, the banks are extremely nervous about lending to anyone they can't identify as a safe bet.

But it is hard to see how the property market's bounce can possibly be sustained in 2010 if the supply of mortgage funding to first-time buyers remains cut off.

Get help from lovemoney.com

If you need help getting the best mortgage use our resources.

First, adopt this goal: Cut the cost of your mortgage and pay it off early

Next, watch this video: Getting through the mortgage maze

Then, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 4045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

More: Danger for mortgage borrowers |