Brokers have said that first-time buyer confidence was severely dented following the mini Budget last year, with many prospective buyers putting their plans on hold until mortgage pricing stabilised.
The rising cost of living has also impacted first-time buyers’ ability to save for a deposit and has hit lender affordability assessments, with some brokers noting that the amount some borrowers can now access is more limited.
Mike Staton, director at Staton Mortgages, said that he recently placed a case for a first-time buyer with a salary of £23,000. He said that a high street lender was offering £66,000, which is less than three times her income and she had no financial commitments.
However, he searched the market and found a lender and was able to secure nearly double that amount.
First-time buyers still raring to get on the ladder
Despite obvious headwinds, first-time buyers are still motivated, with research this week from Yorkshire Building Society finding that first-time buyers made up the largest segment of the market in 2022 at 53 per cent. This is up from 50 per cent in 2021 and 41 per cent in 2020.
Brokers for the most part were cautiously optimistic about first-time buyers, with many saying they expect them to continue pursuing their purchase plans. Brokers either thought numbers would stay stable or only dip slightly.
Benjamin Blyth, director at Houz Mortgages, said that while many home movers had put their plans on hold after the market turbulence in the second half of last year “first-time buyers do not seem deterred”.
He continued: “I predict they’ll continue to be active in 2023. They have been planning and saving for years for this goal, and are the most focused to see it through, so I don’t expect numbers to fall.
“Buyers will know their mortgage payment would be higher than house sharing or living at home but equally will know the payments are likely to be lower than privately renting. It’s also the biggest investment in the future and it’s worth making.”
Blyth added that he expected low deposit mortgages to “stick around” and predicted “further lender innovation” to support first-time buyers.
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions, agreed and added: “I don’t see first-time buyer numbers falling. Many first-time buyers have been saving for a deposit for years and are unlikely to let increased rates deter them from their goal of owning a home. “
Falling house prices and rising rents could push more to buy
Some brokers said that anticipated falls in house prices could play into first-time buyers’ hands this year.
Nationwide predicted that house prices could fall by around five per cent this year, with some other predictions from economists edging higher to 10 per cent.
Part of this is due to economic headwinds such as fall in real earnings, interest rate rises and the weakening labour market, but another aspect could be due to landlords exiting the rental sector.
Imran Hussain, director at Harmony Financial Services, that most of its business last year was for first-time buyers and this year “is possibly going to be one of the best years for first-time buyers”.
He pointed to landlords selling their properties due to rising mortgage costs, maintenance and regulation.
Hussain said that those with secure employment would look to get out of the rental sector and get on the property ladder and would be “more active”, especially in light of rising rents.
Lewis Shaw, owner and mortgage broker at Riverside Mortgages, said that first-time buyer numbers will fall until “prices come down by any meaningful amount”.
He continued: “High mortgage rates and the imminent buy-to-let fire sale will fuel this. However, we’ll see first-time buyer volumes recover once that is in full swing. The advice I would be giving to any first-time buyers is to ensure they negotiate hard.
“We’re in a buyer’s market now, and first-time buyers with a good deposit and no chain hold all the cards. The market has been stacked against them for a good few years, so it’s only natural that the see-saw tips the other way for a while.”
Riz Malik, director at R3 Mortgages, said that he thought first-time buyers “will be in the best position they have been in for quite some time”.
He agreed with Shaw that first-time buyers needed to “engage in vigorous negotiation”.
“When they make an offer, they should provide justification and also highlight their attractiveness as buyers,” Malik explained.
Pandemic trend of houses could be reversed
Justin Moy, managing director at EHF Mortgages, said that first-time buyers would be an “interesting barometer of national confidence”.
He noted that there could be similar numbers of new buyers in the market buying cheaper properties due to “lender affordability pressures”.
Moy said there was uncertainty around whether this could push prices down or change the type of properties sold, noting that it could reverse the pandemic trend and lead to more flats being sold over houses.
“There is still an appetite for buying and not renting, if that can be achieved with reasonable mortgage rates and property prices.”
Speaking to a broker ‘best advice’ for a first-time buyer
Mistry urged first-time buyers to speak to a broker as they could access more lenders and products, some of which were exclusive to brokers.
He said Generation Home’s product allowed other helpers, such as parents to go onto the mortgage without being on the property deeds. This can increase the amount that buyers can borrow.
“This type of solution may be necessary for some parts of the country, where it may be difficult to secure a certain mortgage amount without assistance. It is important for more lenders to adopt this approach in order to make homeownership more accessible for all,” Mistry noted.
Hussain agreed that the “best advice” for a first-time buyer would be speak to a mortgage advisor as soon as possible.
He continued that with the possibility of banks having less lending appetite “independently-owned businesses will be worth their weight in gold for 2023 and beyond”.
