First-time buyers: should you buy now?

7 min Read Published: 18 Jan 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 their first property, timing can have an effect on both the price they 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 (January 2021)

Over the last 9 months (up to January 2021) the housing market has been 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 £237,00 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 essentially continued in varying forms into the start of 2021. While its impact has yet to feed through to house prices, a prolonged lockdown will likely be bad news for UK house prices as it was in the spring of 2020.

Another factor to consider is that due to government intervention, unemployment has so far been suppressed despite the economic contraction we've seen as a result of Covid-19. However, when this intervention/support is removed it is anticipated that unemployment numbers will rise, which will likely dampen activity in the housing market.

If there is nervousness around unemployment this will have a negative effect on the availability of mortgages particularly for first-time buyers who are looking for a mortgage of 90% LTV or higher. As the availability of first-time buyer mortgages reduces lenders can be selective, favouring applicants with a larger deposit who pass all their financial checks with flying colours. So if you can secure a mortgage this will likely be the biggest factor influencing whether now is a good time to buy your first property or not.

Current mortgage market (January 2021)

The availability of mortgages with a low deposit has reduced significantly during the Covid-19 pandemic due to uncertainty in the housing market and the threat of an increase in unemployment. Lenders are more 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.

A minimum deposit of 10% of the property value should provide you with a range of mortgages to choose from. Whilst you may be able to secure a mortgage with a deposit of 5% your choices will be limited and you may be paying a higher interest rate which will increase your monthly outgoings.

According to the mortgage broker Habito, if you are currently looking to buy a property for £200,000 with a 10% deposit you could choose from 17 mortgages with a 2 year fixed term. If you reduced the deposit to 5% there would be only 3 mortgages with a 2 year fixed rate to choose from. The larger the deposit you can save the better your options will be when choosing a mortgage and the lower your monthly mortgage repayments. If you have been gifted part or all of your deposit you may well have to prove that it is a gift and that it will not have to be repaid.

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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