First-time buyers: should you buy now?

8 min Read Published: 15 Jun 2021

First-time buyers: should you buy now?Is now a good time to get on the property ladder?

Getting a foot on the property ladder is a dream for many people and, when buying your first property, timing can have an effect on both the price you pay and the availability of an affordable mortgage.

Activity in the housing market fluctuates due to seasonal changes in supply and demand and because of wider economic conditions. From a seasonal viewpoint, the busiest period for the housing market is between March and September, with the peak being between March and July. This is usually the best time to start searching for your first home as there will be a large number of properties on the market.

However, the availability of affordable mortgages also fluctuates over time, again driven by economic conditions. When the economic backdrop is positive the housing market will be active with prices increasing and a large range of affordable mortgages available. Conversely when the economic backdrop is negative house prices start to stagnate, or even fall, and the availability of mortgages reduces as lenders become nervous about lending in a falling market.

Current housing market (June 2021)

Over the course of 2020 the housing market went through a turbulent time due to the Covid-19 pandemic. There was a period of lockdown (March to June 2020) that halted many businesses (including estate agencies) followed by a period of more relaxed Covid-19 restrictions together with a temporary reduction in Stamp Duty Land Tax that boosted property demand and therefore house prices. According to data from mortgage lender Halifax, the average UK house price was £239,927 at the start of 2020. This fell to £237,000 by the end of the first lockdown. Prices then rose to £253,243 between the end of June and the end of November 2020.

However, due to an increase in Covid-19 cases, a further lockdown was implemented at the end of October which has continued in varying forms into 2021. Although this had a slight dampening effect on the rampancy of the housing market at the beginning of 2021, confirmation by the government that the Stamp Duty holiday would be extended until the end of September 2021 (no Stamp Duty to pay on first £500,000 until the end of June 2021 and then on the first £250,000 until end of September) meant that it soon ramped up again.

As it stands, the housing market appears to be at a crossroads. The help the government has provided has driven house prices up by around 10% from a year ago and the number of people moving has grown substantially. However, as buyers began to realise they wouldn't be able to meet the stamp duty holiday deadline of 30 June to get the maximum tax relief, estate agents began to report a reduction in the number of new properties coming to market. It remains to be seen whether we will see a house-price correction over the coming months as the heat begins to go out of the market. It looks unlikely though that prices will continue to rise at the same rate they have over the previous year.

For regular updates on the state of the housing market, read our article "What is going to happen to UK house prices?"

Current mortgage market (June 2021)

The availability of mortgages with a low deposit had reduced significantly during the Covid-19 pandemic due to uncertainty in the housing market and the threat of an increase in unemployment. However, the government introduced its mortgage guarantee scheme to incentivise lenders to offer 95% LTV mortgage products, a move that has been successful in stimulating the mortgage market. It means there is now more choice for first-time buyers, particularly those who have a smaller amount to put towards a deposit.

For a guide to the best mortgage products, check out our articles on the best and cheapest 95% LTV and 90% LTV mortgage deals. We also have a more in depth guide "How much deposit do first-time buyers really need?"

Lenders are still cautious and will scrutinise closely every applicant's personal finances, including how they have handled credit in the past. Getting your finances in order prior to making your first mortgage application is vital and I would suggest reading our article - "What do lenders look for when getting a mortgage?" for an insight into what lenders are looking for.

How to get the best first-time buyer mortgage deal

If you are a first-time buyer it is important to understand that lenders will be more cautious when it comes to granting you a mortgage. Making sure your finances are in good order, having a clean credit report together with a provable regular income are all desirable before applying for a mortgage. To see the best mortgage deals for your own personal circumstance use our Mortgage Best Buy Table and enter a property value as well as your deposit amount.

The larger the deposit you have accumulated, and assuming you have a good credit history, the more likely you are to be accepted for a mortgage and you will also have a wider range of deals to choose from. When arranging a mortgage you can apply directly to a lender or use the services of a mortgage broker, such as Habito* which is an online mortgage broker. Applying directly to a lender will limit your choice of mortgages whereas using a reputable mortgage broker will provide a wider choice of lenders and mortgage deals. Before applying for your first mortgage make sure you check all the details of the loan and the costs involved so that you fully understand your commitments.

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