Although dropping prices usually bode well for those who need a first time buyer mortgage, this time around, it may be harder than ever for these customers to get a loan. The credit crunch is expected to last through at least 2009, and Chancellor Alistair Darling has already marked down another 20 billion pounds in anticipation of a revenue shortfall from taxes. Those seeking first time buyer mortgages may be better off waiting for the crisis to ebb before venturing into these dangerous waters, warn experts.
“We don’t want to argue that things can’t go wrong in the UK economy or that this is likely to be anything other than a difficult year,” said Robert Barrie an economist with Credit Suisse. “However, it seems to us - against the record of the past 10 years and the behaviour of the economy at the start of this year - that sentiment may again be unduly pessimistic.”
Banks are making it very difficult for many people to get a first time buyer mortgage unless they have absolutely pristine credit. “There is a lot of credit rationing going on. Indeed, the credit markets are pricing in Armageddon,” says Richard Batty, a strategist at Standard Life Investments.
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