Buyer demand has kept the property sector exceptionally busy and driven house prices up. But speculation that house prices will fall once the dust has settled could mean the market becomes friendlier to first-time buyers later in the year.
So this week, Mortgage Solutions is asking: Have your first-time buyer clients hinted at waiting until the market calms down to make a purchase?
Since January, my first-time buyer enquiries have outweighed any other type of enquiries that I’ve been having.
I feel that many first-time buyers have been waiting in the wings for high loan to value (LTV) mortgages to return, and they’re now back out in full force.
What I have noticed especially in my area is that multiple first-time buyers are chasing the same property which has meant that sellers have achieved their asking price. I’m certainly not seeing or being asked if the house prices will drop.
Whilst there is optimism, we certainly have a market.
Moving forward into Q2, we really need to see how the rest of the market reacts.
I think it’s highly likely that first-time buyer enquiries may well outstrip the demand and property supply could be an issue.
There is certainly the appetite for them to get onto the property ladder, we just need the supply of properties in order for this to happen.
The return of high LTV lending is good news but I would like to see a few more lenders back at 90 per cent LTV for flats and apartments as this is where many first-time buyers look for their first home.
January is historically a month in which we receive an increased number of enquiries from first-time buyers.
This year we saw 64 per cent of new enquiries coming from first-time buyers which is significantly more than we saw in Q3 and Q4 last year, and more than we typically see in January.
The re-introduction of high LTV mortgages has also boosted confidence.
When the first lockdown sent the market into chaos, those with smaller deposits were most disadvantaged as 90 per cent and 95 per cent LTV mortgages disappeared almost overnight and interest rates at 80 per cent and 85 per cent increased significantly.
This caused many first-time buyers to shelve their home ownership plans until the high LTV market showed signs of recovery.
We’ve definitely seen signs of this recovery in recent weeks with many lenders returning to the high LTV space and income criteria relaxing a little as some lenders start accepting bonus, overtime and commission again.
We haven’t heard of potential price drops influencing many prospective FTBs.
The future of house prices is impossible to predict, but what we can tell our clients from previous cycles is that when house prices dip, the availability of high LTV lending reduces and the cost of the options that remain often increase.
For those thinking house prices will dip in Q2 I’d warn that the availability of lending, or lack thereof, might mean you can’t take advantage of ‘cheap’ property prices.
Looking at the bigger picture, the demand for housing and homeownership has historically caused house prices to recover relatively quickly. Whilst we can’t always rely on past performance when it comes to the future, it’s hard to imagine a situation where house price inflation remains flat or negative for a sustained period of time.
Then again, if 2020 taught us anything it’s that you shouldn’t rule out the improbable too quickly.
I have had a bit of a mix. Some first-time buyers are struggling to find competitively priced properties due to the high demand of buyers looking to complete before the stamp duty holiday deadline.
This has driven the property prices higher which would in a way cancel any potential stamp duty saving. The other issue we are having in the current market is that valuers are down valuing the properties because, due to the demand, they are selling above market value.
I wouldn’t say that the return of high LTV mortgages has given first-time buyers the confidence to proceed with purchase plans.
I would say that by offering higher LTV mortgages there are more purchasers able to obtain a mortgage especially in London where the average flat price is £558,686, as quoted by Rightmove.
With a 10 per cent deposit a purchaser would need £55,869 compared to a 15 per cent deposit of £83,803 which is a substantial difference.
The possibility of price drops has inspired first-time buyers to wait for that to happen.
I have also been advising my clients not to rush to purchase a property now unless they feel it’s the right property for them, and they are prepared to pay slightly more to obtain it.
I feel that after the 31 March, unless the government extends the stamp duty holiday, we will start to see property prices dropping.
Lots of people are struggling financially due to the pandemic and with the furlough scheme ending in April I believe that there will be more property coming on the market for sale.