Housing summit warns 'no magic bullet' to end slump

Lending bottleneckcontinues to thwartfirst-time buyers

THE misery facing first-time buyers is set to continue after lenders warned the government that there is no quick fix for the housing market slump.

First-time buyer numbers have plunged over the past three years as those without significant deposits have been squeezed out of the market. But banks and building societies told a government-hosted meeting yesterday that funding constraints on lenders and the under-supply of affordable housing means there is no "magic bullet" that will fix the housing market.

The summit, called by housing minister Grant Shapps and attended by groups including lenders, housebuilders, local councils and the Financial Services Authority, was aimed at identifying ways of helping first-timers.

However, Shapps was told that while shared ownership and product innovation would help, normality would return only gradually to the housing market as confidence in funding markets and lending decisions was restored.

Last month the average first-time buyer put down a 23 per cent deposit of 31,500, compared with an 11 per cent deposit of 13,900 just three years ago, Council of Mortgage Lenders (CML) figures show.

The government estimates that about 1.4 million households want to own their own home, but the CML warned yesterday that the limited availability of affordable mortgages was unlikely to ease. It said that with lenders having to hold up to eight times more capital against 90 per cent loans than on 60 per cent loans, there were implications for both the volume and price of high loan-to-value mortgages.

Michael Coogan, director general of the CML, said: "It is good to see ministers taking the initiative to discuss how we can look to improve market conditions for first-time buyers. But no-one will be surprised to learn that there is no simple quick fix for a market that has changed fundamentally since the credit crunch."

Earlier this week, the Scottish Government unveiled funding aimed at boosting housebuilders and helping first-time buyers. The 16 million investment includes a shared equity scheme to help people on low to moderate incomes in rural areas to get on the property ladder.

Graeme Hartley, director of the Royal Institution of Chartered Surveyors (Rics) Scotland, welcomed the initiative. But he cautioned that it "merely scratches the surface of our major housing problem".

He said: "This scheme may help a minority of first-time buyers but looks more like a scheme to honour a manifesto commitment in the run-up to an election. Those who aspire to own their own home may have to accept, for the time being at least, that renting is the only option or turn to the 'bank of mum and dad' to find a deposit."The outlook for the market will improve only if house prices fall further or lenders relax their deposit requirements, said Neil Harrison, marketing manager at the Edinburgh Solicitors' Property Centre.

"If the government were able to encourage the banks to focus more on the affordability of repayments than deposit levels, this would be a positive step forward. Responsible lending will itself provide a cap on house prices as buyers will only be able to borrow to levels they can afford," he said.