Five things to give aspiring first time buyers hope right now

Since the now infamous (dare we say the word) “mini-budget” in September 2022 media headlines concerning aspiring first-time buyers have been dominated by doom, gloom and shattered home-buying dreams, with no good news seemingly in sight. Not the most inspiring if you’re hoping to own a home one day.

Related topics:  Finance,  Property,  FTB
Cecilia Mourain | Moneybox
24th February 2023
FTB 337

Aspiring homeowners remain remarkably resilient and determined to make their home-buying dream a reality, despite all the doom-mongering of late.

Recent Moneybox research found that 42% of aspiring homeowners still feel optimistic about the prospect of buying a home, and looking beyond the headlines there are some encouraging factors giving aspiring homeowners a reason to stay optimistic.

Here, Cecilia Mourain from Moneybox, summarises the top five:

1. House prices have started to come down

After a long period of growth, house prices have started to come down, falling for five consecutive months in a row, with house prices down 5.6% compared to their peak in August, with predictions that the market downturn will last longer than it did during the financial crisis. While these falls have other consequences, they do make houses more affordable for first-time buyers.

With the market moving so quickly, it’s understandably difficult for prospective buyers who are new to the property market to keep their finger on the pulse and try to understand every market change reported in the news. However, this is where brokers can help first-time buyers, by breaking down and painting a more holistic and realistic picture of what is happening in the market and what it means for their individual circumstances.

2. The worst is over

The worst of the mortgage rate shocks is over. The mini-budget and the fallout were that dreaded word: unprecedented. We saw mortgage rates jump to over 6% almost overnight, and hundreds of offers pulled from the market at a record rate. The current government is painfully aware that the market sorely needs calm and certainty, and we have seen that over the last few months.

This has allowed competition to return to the mortgage market with average two, five and even 10-year rates steadily coming down - albeit not at the rate at which they increased but nonetheless are decreasing. Additionally, swap rates, which banks use to price mortgages, have been consistently falling, and the number of overall mortgage deals available has been steadily increasing again.

Lenders are now pricing their products at more competitive rates and there are a number of competitive tracker rates on the market at the moment. For those who prefer stability, five-year fixed rates are coming in slightly cheaper than the current two-year fixed rates. Whilst these are all that much higher than the pre-mini budget, the gradual reduction is a comforting sign to some first-time buyers, with the hope that this trend will continue bringing monthly repayments back to an affordable amount.

3. There are products out there designed to help prospective buyers- and one of them can offer a free top-up to savings

There are still products out there that are aimed at helping first-time buyers to achieve their home-buying dreams. The Lifetime ISA is one of these products that’s worth getting to know for anyone looking to buy their first home. It’s the only real inflation-busting product out there currently, and nowhere else do you get

a 25% top-up to your house deposit savings. If the recent market turmoil has set prospective buyers’ timeframes back a bit then the silver lining is more time to get more government bonuses and build a bigger deposit to put towards their future home.

4. The odds may be in your favour

The “balance of power” has shifted marginally from sellers to buyers over the last few months. In recent years when house prices rose steadily, it has been a common sight to see dozens of potential buyers crowding house viewings and having prices driven up by demand.

In recent months, however, we’ve seen demand slowly declining and cuts to listing prices haven’t been uncommon. First-time buyers with a good deposit and a mortgage lined up are in a stronger position to negotiate.

5. Professional advice is available to help you understand your circumstances

A third of aspiring homeowners said they felt worried when seeing home-buying-related headlines. However, even during the immediate aftermath of the budget, market activity continued and many first-time buyers were getting the keys to their dream homes every week. It’s important that first-time buyers are aware that free, professional advice is available.

The industry at large is responsible for ensuring that prospective buyers are aware of the help available to them, such as highlighting the role brokers can play in the home-buying journey, assessing their circumstances and helping them understand what’s actually available to them in the market at any time, or what their options are – and help more people get one step closer in releasing their dream of owning a home

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