With the football season now well under way, and the transfer window firmly closed, supporters up and down the land are debating which new signings will make the grade and which will be resigned to the sidelines after failing to live up to some lofty expectations. Not that they will be lonely. It’s fair to say that the sidelines have proved to be a popular place over the past six to 12 months.
According to research from Aldermore, the delay to Brexit has caused almost half (47%) of first-time buyers to change their plans, with a quarter (24%) delaying purchasing a property. Some 16% are suggested to have delayed by 12 months or more.
This comes as no great surprise, lingering uncertainly has resulted in many sectors suffering from lulls in confidence and activity. Experian’s Credit Barometer also outlined further issues for first time buyers, reporting that the average deposit amount required by first-time buyers increased by 17% over the last 12 months, reaching £30,945. In July 2018 this figure was suggested to be £26,498 and represents a significant increase for those looking to secure their first home.
Will the first time buyer subs bench remain overcrowded?
Staying with the footballing parlance, some of the aforementioned data came in the form of a game of two halves.
The Aldermore data also outlined that over a fifth (22%) of prospective first-time buyers have brought their plans forward, with one in 10 (10%) doing so by up to three months and 12% by six months or more. It also highlighted that short-term political ambiguity and economic conditions have not dampened prospective first-time buyers’ appetite for homeownership, with 81% saying it remains a dream to own a home and, similarly, 81% still viewed property as a good investment.
Digging deeper into the Experian Barometer, this also showed that first-time buyer demand remained relatively high in July 2019 with over half (56%) of all mortgage searches generated from this group of borrowers. In addition, UK Finance’s Mortgage Trends Update reported that first-time buyer activity remained stable with 30,720 new first-time buyer mortgages completed in May 2019, 0.5% more than the same month in 2018.
Could more first time buyers secure their homeownership goals?
While many first time buyers and homemovers will, quite understandably, be looking for greater market certainty before making property-related decisions, it’s great to see that homeownership aspirations are strong, even if these are somewhat tempered by the realisation that they are likely to be met later and for longer. And it’s certainly not all doom and gloom for first time buyers, far from it.
Low interest rates and stagnant house prices mean it is a prime time for those first-time buyers – in the right financial position and taking a longer-term view of the market – to act sooner rather than later. Staying on a positive note, competition in the mortgage market continues to significantly squeeze mortgage costs in the right direction for borrowers and product availability levels are good. More could be done at the higher LTV bands to support a greater number of first time buyers onto the property ladder, but this remains a delicate balancing act in terms of staying within responsible lending and risk boundaries.
The question remains – how many first time buyers will grasp the opportunities on offer and how many will remain on the sidelines waiting for the next transfer window?
Your guess is as good as mine. What we do know is that competition will continue to heat up within the lending community, a variety of government schemes are helping more and more first time buyers onto the property ladder and, as always, good professional and holistic advice remains at the core of this decision-making process.
Craig Calder is director of mortgages at Barclays