10 July 2008

Brewin Dolphin, the UK's largest independent private client investment manager, believes that first time buyers in particular will need to save if they are to be able to get onto the property ladder. Their advice comes as the Monetary Policy Committee announce no change to interest rates, an announcement that will affect homeowners, potential buyers and housebuilders up and down the country.

While the recession in the 1990s saw a fall in the level of home ownership, a large majority of the UK's population now own their own property and home ownership remains an aspiration for those starting out. However, with inflation on a rapid rise and the MPC reluctant to lower interest rates, it is a dream that has become more difficult to fulfill.

Charlotte Black, Director of Corporate Affairs, Brewin Dolphin said: "Much has been made of the looming housing crash. However, even if we assume the worst, the most pessimistic assessments do not expect house prices to fall by more than 25% from their peak. This would still mean that domestic property, on average, has more than doubled over the last decade.

The rush to get on the property ladder, coupled with the promotion of abundant cheap credit on TV and on the high street, has seen the level of personal debt in this country spiral alarmingly. Even when one does get on the ladder, property ownership has its costs and owning a home pays no income, so there is also an opportunity cost in having one's investments tied up in such an asset.

This is not intended to discourage people from attempting or even aspiring to own their own property, rather to warn of the dangers of doing so without the proper financial situation and careful planning. The key, in our opinion is to save for a deposit, and to ensure that you take the step of home ownership only when you can afford it and ensure there is some equity from the outset. Until very recently with the onset of 100% and then 120% mortgages – it was perfectly normal for a minimum 10% deposit to be made and we expect those days to return when the market settles. It is crucial not to mortgage your own financial future."

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