(1888PressRelease)
February 24, 2007 - One method of helping out the ever struggling first-time buyer, released last year, was the co-buyer mortgage, where two people would buy a property and commit to paying off the mortgage together.
But this means that they will have to split the profits once the house is sold and is therefore only beneficial in time of exceptional growth.
According to both Halifax and Nationwide, property price inflation was running at around ten per cent over the course of last year, which panicked many potential buyers into leaping onto the housing ladder at the cost of a high mortgage to avoid being left behind as price spiralled.
However, with house prices only destined to rise by around seven per cent this year, partly tempered by three interest rate rises between August and January, joint mortgages will not bring in substantial profits for those hovering around the lower echelons of the housing market, claims Phil Holmes, spokesman for Firstrung.
"Given that most analysts expect only seven per cent growth at best this year, the paper profits [of co-owners] would be negligible and do not assist the first time buyer in getting on the first rung independently.
"If prices kept increasing by seven per cent over four years the percentage growth the co-buyer would enjoy would never keep up with house inflation overall, therefore their ambition of home ownership would never be realised, in fact the first rung would be slipping further out of reach."
He concluded: "Individually the co-buyer would enjoy seven per cent growth in four years, yet the market would have moved on 28 per cent!"
Therefore the sums do not make sense investment wise for the hard-up first time buyer and they would be better off putting their cash into a high-yielding savers account until the economic conditions become right to buy outright.
The news will come as a relief for many buy-to-let investors who were concerned that the flexibility of UK mortgages, which particularly increased last year, were geared towards encouraging young people to buy rather than rent.
