First-time buyers: should you buy now?

7 min Read Published: 17 Jun 2022

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 2022)

Over the course of 2020/21 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.

House price inflation continued throughout 2021, with the market reaching a peak in May, as the end of the extended stamp duty holiday at the end of June, which offered a saving of up to £15,000, came into sight. The market remained buoyant until the end of September, with buyers still able to avoid tax on the first £250,000 of any property purchase, meaning up to £2,500 in savings. However, even without the tax incentive, property prices continued to grow - albeit at a slower pace - in the final part of the year.

Somewhat surprisingly, there has been further heat in the market over the first half of 2022, with a mismatch between the number of properties on the market and the number of buyers driving prices up. However, there are signs now that this is starting cool, with the effects of inflation, the cost of living crisis and rising interest rates slowing the market.

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 2022)

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?"

Although the time to secure really competitive rates - some as low as 1% - has now passed, there is still growing demand for fixed-rate mortgages among first-time buyers and those remortgaging as they attempt to avoid the impact of further interest rate rises. However, with affordability assessments a key component of securing a mortgage deal, the fact the cost of living is going up significantly may impact how much you are able to borrow.

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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