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House buyers could be paying off their mortgage in retirement

Pity first-time house buyers. Having finally seen the ladder lowered from the great property juggernaut in 2008, most could still only scramble on-board with a loan from the Bank of Mum and Dad.

And as mortgages have become easier to get in 2009, house prices have shot back up, reversing the UK house price crash before it had barely begun.

Some 45% of house purchases in May 2009 were by first-time buyers – a huge number by the standards of recent years. But by November the percentage was down to 19%, according to the National Association of Estate Agents.

An article on the BBC [1] quotes Graham Saunders, a would-be home owner:

“My dad is a bus driver and my mum works in a book shop,” he says.

“They have no savings of their own and they are paying their own mortgage so they can’t help me out. And I wouldn’t expect them to offer to help either.”

This is leading to a growing sociological rift: The average age of a first-time buyer is around 31, but the average age of those buying their first home without parental help is up to 37.

People expect to work until 65 and the typical mortgage is for 25 years.

If the average age of first-time buyers continues to rise, they could one day be paying off their mortgage with pension money!

Housing market horrors

I have long called the UK housing market wrong, so take anything I write on the subject with a pinch of salt.

In fact, I don’t even own a house – I tried to be clever back in 2004 and pulled out of a hunt for a flat, believing everyone was in cloud cuckoo land and that prices would tumble.

When the credit crisis [2] struck I felt vindicated, even if collapsing property prices took my equity portfolio with them.

But the downturn has proved short-lived. Bankers bonuses [3] and the cheap pound have already taken some parts of prime London back to their pre-crash level, while the UK market rose nearly 10% in 2009. Most pundits predict prices will either be stable or rise in 2010, too.

I can afford to buy but I’m so far choosing not to – I can’t spend £350,000 on a two-bedroom flat just because I’d like to paint the walls the colour I choose.

UK house prices still makes little sense to me – it remains cheaper to rent than buy [4] in most of London. And people forced to pay off their mortgage in their 60s smacks of an ongoing bubble.

We may not see the sort of falls in residential housing that produced bargains in the U.S. and in UK commercial property [5] last year, but it’s surely unthinkable that house prices will rocket from here.

What do you think? Am I just stubborn? Should 2010 be the year I buy?