Credit crunch, Northern Rock, US property market imploding. The property boom that we were all enjoying seems to be well and truly over, and it doesn't seem like it will get back on track for some time.

House prices are now lower than they were a year ago and that hasn't happened since 1996. But what does that really mean for you and me and the average person on the street? Is it all doom and gloom?

Round and round
For the first part of 2008, panic set in as property prices fell sharply.

However, for some experts this is not a disaster, but actually a well overdue price correction. A report from the International Monetary Fund claimed that house prices in Britain were almost 30% higher than could be explained by factors such as disposable income, interest rates and the size of the working-age population. And that age-old saying 'what goes up, must come down' is coming into play here.

For first-time buyers, house prices have risen 200% in a decade, and the average first property price has rocketed from £52,674 to £159,494. To make matters worse, because of the credit crunch, mortgage lenders are batoning down the hatches and not lending money to the public or other banks. No longer can you get a 100% mortgage, and banks aren't even passing on the full base-rate cuts made by the Bank of England. Nationwide said falling demand from first-time buyers, higher mortgage costs and tighter lending criteria had all contributed to the downturn being experienced.

A helping hand
One initiative to help first-time buyers, and other people battling their way through the property market, is called Ownhome. It has been set up by the housing group Places for People and The Co-operative Bank. With government backing, its aim is to increase the number of affordable houses. It is aimed at key workers - which includes police, teachers and nurses - as well as social-housing tenants and first-time buyers with an annual income of less than £60,000.

What it means is that you can borrow between 20% to 40% of the value of the house from Places for People, and The Co-operative Bank will offer the rest of the mortgage on the remaining amount. Key benefits of this scheme include no payments on the equity loan from Places for People for the first five years; no additional premiums or increased rates built into The Co-operative Bank mortgage; no deposit needed, although the flexibility is available to pay one if the customer can afford to do so; and buyers will own 100% of their home, so there is no rent or landlord to pay.
For more information go to www.ownhome.co.uk

Share and share alike
Housing associations, including Assettrust Housing which is based in London but manages properties throughout the UK, are also involved in schemes to help people on lower incomes get onto the property ladder. As Assettrust says on its website: 'What do you do if your earnings don't stretch to a big mortgage, and house prices are going up all the time?'

What it and other housing associations do, is work with landlords and local authorities to provide high-quality accommodation for rent or for buying through shared ownership. With this you buy a percentage of the value of the property, as above, and then pay rent to the housing association. That means the mortgage is manageable and it gets you on the housing ladder. There is also the chance to buy a larger percentage of the property as your income increases, and eventually you can own it outright.
For more info on Assettrust go to www.assettrusthousing.com

Sit tight
Most experts are saying that this current downturn was inevitable and dips are a natural part of the property cycle. But they also believe it will recover in time, so it might be worth just sitting tight for now and waiting to see what happens before you decide to move. If you do need to remortgage then start looking at least three months before, and do your research thoroughly with some independent expert advice.

And for beleagured first-time buyers? Perhaps getting on one of the schemes mentioned might be worth considering.

Written By Georgina Maric
Photograph: lewisimagebank.com
First Published in At Home with Andrew Winter, June 2008