A fall in house prices could see potential first-home buyers finally able to get a foot in the door.

According to housing analysts Hometrack, a quarter of young working households in the UK are unable to afford to enter the property market.

The worst affected areas are London and the South West with both have around 40 per cent of young working households unable to afford to enter the property market.

However, there is light at the end of the tunnel with Hometrack revealing that the expected drop in housing prices is allowing some of these young working families to get off the rent cycle.

Hometrack director of research Richard Donnell said until such time as mortgage rates start to fall then lower house prices will be the only real driver of improved affordability for first-time buyers.

High interest rates are deterring buyers now, but as prices fall some will dip their toes in the market.

There is a lot of talk about higher interest rates hurting homeowners, but it presents a perfect opportunity to enter the market.

It is better to buy with a high interest rate and get a house at a reduced price, rather than when interest rates are low and housing prices are at the premium. That is when borrowers get into trouble.

By having a lower principle you pay substantially less over the life of the loan and month to month repayments are also reduced as interest rates inevitably decline.

Low interest rates are good in the short term but they do go up and this puts strain on budgets.

This entry was posted on Thursday, June 5th, 2008 at 1:24 pm and is filed under Interest Rates, Loans, Money saving. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.