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The first-time buyer fightback

by: Lea Karasavvas
  • 18/04/2013
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The first-time buyer fightback
Its been quite a repetitive story over the last two years.

“Business has been good but we just don’t have enough stock.”

“Vendors are lacking a confidence to bring their property to market as they just don’t feel there is a big enough demand for it given the ‘current lending’ proposition from lenders.”

“If only we could do something to stimulate the first-time buyers.”

These are selection of comments mortgage brokers have become accustomed to hearing from estate agents all over the country in the last few years.

As first-time buyers became harder to obtain finance for, being priced out with high rates and lower income multiples, the property market stagnated somewhat as chains could not get established, missing vital links to complete them.

Finding a first-time buyer or second stepper was as hard to find as a new computer without Windows 8 (don’t get me started on Windows 8).

However, recent price wars have seen a significant reduction in rates at 90% borrowing, with rates at present considerably less than they were two years ago.

Competition from some of the bigger lenders has seen first-time buyers return to the market. It has also demonstrated to some, that second steppers now have the ability to move property again.

There has been a role reversal in the sales process. Gone are the days when clients would go shopping for a property, find one they want, offer, get it accepted and only come to us to source their mortgage for them.

The complexities of the market have educated the public a lot more and the first step is now the broker first, to obtain a decision in principle and a generic idea of borrowing and then, once this has been established, the buyer goes out to the market to see what is available.

The knock on effect here is that brokers see the public first, position a maximum borrowing from lenders, and then they commence the shop. This means that buyers are more educated on their budgets, know in general what they can afford, and also know that ‘in principle’ they are good to proceed with a lender, speeding up the process and bringing back a solid first time buyer to the chains.

The reduction of rates at higher loan-to-values has resulted in many of us seeing a lot more of this clientele, meaning that agents will soon be flooded with an influx of first-time buyers/second steppers ready to get active in the market again. Logic suggests that as demand starts to outweigh supply, the only thing that can happen to price – is it will rise.

Whilst this is basic economics – the concept of demand and supply is never more prevalent than in the property market and Dr Poole can be encouraged to see me applying this to my trade (Economics, class of 92, never forget).

There are many other external factors of course that effect this market, but right now as a broker I am encouraged, and as confidence returns to our purchasers, it will also return to our vendors, so estate agents should share our optimism.

As broker confidence in first-time buyers and second steppers increases, so too should the expectation from agents that the market will soon see an influx of buyers not witnessed for some time.

Sealed bids could soon be back with a vengeance…

Lea Karasavvas is director at Prolific mortgage finance

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