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A first-time buyer’s view of the market

by: Ross Bowen
  • 19/04/2011
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A first-time buyer’s view of the market
What’s it like if you’re a first time buyer looking to get into the property ladder?

Connells’ first-time buyer centre in Plymouth has direct experience of how the sector is faring. Since the credit crunch, the number of first-time buyers has fallen each year, although the centre has noted an increase in the number of landlords taking advantage of lower house prices and growing rental demand.

Lower house prices since the credit crunch have enticed those able to buy to go ahead, enabling them to get more for their money than previously possible.

For those still saving up, the centre often acts initially as a general resource, providing advice and guidance on how much could be borrowed and hence what type of property is affordable.

Nonetheless, there is clearly still a strong interest in buying property, as 70% of those who consult us go on to purchase a property.

Yet, this masks the number of first-timers who simply don’t register with us, based on being unable to overcome the hurdles of securing a mortgage.

Despite the availability of more 90%+ LTV deals recently, the vast majority of first-time buyers still borrow around 85% of purchase price.

For many, this is because they do not pass the more rigorous credit checks required at higher LTVs. Others prefer to keep their monthly payments as low as possible and save for longer to get a deposit. But for many, it’s their family members who supplement their own deposit savings.

For those first-time buyers whose mortgage applications are rejected, we have found there are three principal reasons: the applicants have not amassed a sufficient deposit, they fail the credit score or, for self-employed applicants, they don’t have adequate records of their earnings.

As for the various initiatives in place to help first-time buyers get on the property ladder, shared ownership is popular, so the new FirstBuy scheme announced in last month’s Budget may help boost sales locally.

However, we are disappointed that it only relates to new-build properties on selected developments and will not help those choosing to buy an older property. The limit of £250m funding will also significantly restrict any widespread impact across the country.

The Stamp Duty holiday for novice homebuyers is also welcome – though of limited interest in Plymouth, where properties are regularly available below the Stamp Duty threshold.

The clear message coming through from first-time buyers is that they still see property as a great long-term investment and are keen to buy.

But they depend upon the right support from lenders and government and, with the current restrictions on accessing affordable mortgages, first-time buyers are likely to continue to rely on parental support.

If only more lenders welcomed this….

Ross Bowen is mortgage services director at Connells

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