By Chris McDonald, of the Cumberland Building Society

Last updated 22:29, Wednesday, 04 June 2008

With the Council of Mortgage Lenders (CML) predicting a seven per cent fall in house prices, the cost of living continuing to rise, and mortgage rates remaining stubbornly high, you would be forgiven for thinking that first-time buyers have disappeared.

• Vist the Cumberland Building Society website

Enjoy: Don’t rush in – take time to find your ideal first home and the climate should be right for negotiating a good price

www.cumberland.co.ukThe market has certainly declined as potential buyers sit back and wait for house prices to fall, or save the minimum five per cent deposit now required.

However, despite the current projections, people’s basic desire to own their own home is unlikely to change. According to the CML’s 2007 survey, 57 per cent of under 30s who are not homeowners, expect to buy within the next five years.

If you are considering buying your first home, my advice is not to base the decision on any anticipated fluctuations in the “average house price”. This is for three reasons.

Firstly, average prices are largely meaningless. They mask significant variations between regions, types of properties and even individual streets. No-one buys or sells a house at the ‘average price’.

Secondly, it is dangerous to speculate. The only way to know when a market has bottomed out is to look back after the upturn.

Most importantly, the decision should be based on a long-term consideration of where you want to live and whether you prefer the permanency of ownership or the flexibility of renting. If you are going to spend the next year worrying about any increase or decrease in your main “asset”, my advice is not to buy.

The increase in house prices over the last 30 years has produced an unhealthy and unrealistic focus on property as an investment. These increases are abnormal and a return to more realistic long-term growth is anticipated.

Previous first-time buyers may have bought a property with the intention of building up two years of equity then upgrading to their preferred home. With the forecast of more stable house prices, this time frame is no longer realistic and your first home should be seen as a place to live for the next few years, rather than a short-term financial investment.

It seems certain that property prices will fall further during the year. According to the latest Land Registry figures, the number of completions in Cumbria in the first quarter of 2008 fell by 40 per cent compared to the same period last year. Properties are taking longer to sell and estate agents will be encouraging sellers to price realistically. This is an opportunity for first-time buyers.

One of the main considerations will be whether to wait until you have saved a larger deposit. Although 100 per cent loans are no longer available, many lenders still offer mortgages up to 95 per cent of a property’s value. However, you are likely to pay a higher rate if you are borrowing more than 90 per cent of a property’s value and this should be factored into your calculations.

While the market has further to fall, if you are considering buying your first home in 2008, I would suggest registering with estate agents now. Many will have a list of properties which have been reduced and – with a fall in the number of first-time buyers coupled with a decline in buy-to-let sales – it is a buyers’ market.

This means you can enjoy looking until you find your ideal home, and should be able to negotiate a better price.

• For a free copy of the Cumberland’s First-time Buyer Guide visit your local branch, call 0845 601 8396 or click www.cumberland.co.uk
• Your home may be repossessed if you do not keep up repayments on your mortgage.
• Chris McDonald is assistant general manager – marketing of the Cumberland Building Society.