Photo by René Ehrhardt Corner Thornbury Close and Whitehall Place, image:41709:0::0

The BBC:

The squeeze on mortgages caused by the credit crunch has made it difficult for first-time buyers to secure a mortgage deal, even though house prices are falling.

A first-time buyer couple on low incomes must save a year's worth of their take-home pay to buy their first home, the Royal Institution of Chartered Surveyors (Rics) said last week.

A couple in the bottom quarter of earners in the UK would need £27,738 to pay the up-front fees even before paying any of their mortgage, Rics said.

There are more than a few problems with the plan. Buyers have to come up with a deposit, renting at a discount to help them save. That £27,738 could be a real obstacle. That’s around $50 grand, US.

Plans are also being made for local government to create housing schemes, but that part of the scheme isn’t as clear about what the financial conditions are likely to be. There’s some talk about additional funding.

The UK is the first country to try this approach in the current housing market, but it’s not the only country with these problems. The various housing booms in Western countries may have fueled a boom, but they’ve done nothing for their economies, in the rebound.

Criticism of the UK scheme is currently based on the affordability and housing supply factors, including, ironically, an oversupply porblem in some areas. Those are fixable things, if affordability can be locked in. If a rent and buy program can be made workable, it has major ramifications for the housing market, which has neither the credit nor the cash to support prices.

It might, in fact, with some modifications, even help out the US housing market, where capital isn’t likely to be available to cover payments on the old scales.

Whether it helps the mentality that’s been kicking out people who were paying under the old rates remains to be seen.