Property: Appealing properties in homes

LAST YEAR the ratio between mortgage size and house value for first-time buyers was the highest since 1982. A study by the Joseph Rowntree Foundation published last week discovered that one-third of all first-time buyers had mortgages of more than 95 per cent.

Expectations were that post-recession home owners would be more cautious than their predecessors, who had their fingers badly burnt by negative equity. The risk of over-borrowing has been underlined by the lenders: rates of interest rise dramatically for mortgages of 95 per cent and above. In addition, high-risk borrowers face the hefty costs of mortgage indemnity premiums.

Where first-time buyers have been prudent is in the ratio of mortgage to earnings. The days of borrowing three-and-a-half or four times your salary seem to be disappearing, with few customers wanting to stretch themselves too far. This would suggest that buyers are more nervous about job security than about another fall in house prices.

The popularity of fixed-rate mortgages also emerges, rising from 10 to 60 per cent of the market between 1989 and 1993. Professor Duncan Maclennan, the author of the report, warns that the bulk of these loans will come up for renegotiation together, which could have a destabilising effect on the mortgage market.

He says enthusiasm for home ownership has barely been dented by the recession. This is despite an estimated 400,000 repossessions.

The report suggests this reflects the lack of homes to rent and continued government subsidy for home owners in the form of tax relief. I suspect it reflects the fact that, for most people, owning a home still represents their only chance to make a lump sum of money.