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Is the property market going to be harder on first-time buyers?
The current market can cause issues for any potential buyer, but first-time buyers don't have the added equity that other homeowners will when they sell their current house. First-time buyers are being told now is a great time to get on the property ladder, but aren't warned of the problems they could face.
With all of the changes that the world has faced over the last 6 months, we’re starting to see some signs of normality again. The property market is up and running once again, the hospitality industry has bounced back, and the government have been putting into place different schemes to help keep heads above water as we continue through the pandemic. One of the schemes put in place which excited a lot of people is the stamp duty holiday, which now means anyone buying a house under the value of £500,000 before March 2021 does not have to pay stamp duty. This has been a huge incentive for potential buyers, but what does it mean for first-time buyers? We Buy Any House have looked into it to see just what first-time buyers face in the next year.
These drops, at first, sounded like good news for first-time buyers looking to get their foot on the property ladder, but when put with the issues the whole world has faced, it seems that first-time buyers will actually have a harder time buying a house than they previously thought.
What other problems will first-time buyers have to face?
When the lockdown first started, interest rates dropped to a historic low. This looked like it could have been helpful for those looking to take out a mortgage, however, mortgage lenders had to counteract this by increasing the deposit needed to be approved. Generally, you would need a deposit between 5-20% of the house you were looking to buy, but almost all lenders pushed that up to 15%. Now, lenders are starting to reduce the deposit required, but are mostly sitting at 10%, which is still incredibly high for a lot of buyers.
Backing on from that, with the incredibly difficult times that millions of people faced from either being let go from their work or being put on furlough, a massive amount of us had to start delving into our savings for day to day essentials. Because of this, many first-time buyers who may have already had their 5% deposit saved now need to double that amount while potentially having to use it to stay afloat. With earnings being decreased by 20% for a large percentage of those on furlough as well, adding to savings has been near impossible for some, so getting a 10-15% deposit together is just not feasible for a lot of first-time buyers.
What other disadvantages do first-time buyers face?
While it does seem that life is starting to return to normal, none of us can predict the future. There are concerns that the winter will bring more difficulties, and with the furlough scheme due to end in October unemployment levels are also expected to increase again. With all of this in mind, there’s a risk that any of us could feel the strain, but new homeowners with no savings after paying their deposit are at even more risk of financial difficulties. The government did pause repossession orders, but this only until the end of August and there has been no mention of this extending so that safety net is now gone.
This doesn’t mean that first-time buyers should not buy now, but that they should take into consideration all the risks and make sure they have their future as secure as possible. Mortgage lenders will do various assessments to ensure you’re a good candidate, but currently, it’s incredibly hard to say what position any of us will be in in the coming months.
Will house prices recover?
The housing market is incredibly robust and has seen hits like this before, such as in the 2008-2009 crash and recession. While it did recover, it took an incredibly long time to do so, which is the primary concern for homeowners. For those homeowners who aren’t looking to sell in the next year or so, these decreases in value are less destructive than for some who were relying on making a sale and could now be looking at a price 20% lower than they expected if what experts are saying comes true.
This is why homeowners are choosing to sell how, and how we can help them. We Buy Any House can get you a free cash offer and show you how we can buy your house in as little as 7 days, letting you avoid the further house price drops that the rest of this year is bringing and letting you start afresh elsewhere.