Is first-time buyer activity holding up?

The average price of a property fell for the fourth consecutive month in July to £285,044, representing a 0.3% drop, according to the latest Halifax house price data.

Within the report, Kim Kinnaird, director of Halifax Mortgages, said first-time buyer activity was holding up well; however brokers are divided on the level of demand seen. While some brokers believe interest has remained strong, others have reported no resurgence in activity in recent months.

First-time buyer demand

Lewis Shaw (pictured left), owner and mortgage expert at Shaw Financial Services, said over the past two weeks he has seen more first-time buyer activity than in the prior two months.

“This segment of the market is proving especially resilient; with the sell-off in the buy-to-let market in full swing, combined with an increase in more property for sale generally, aspiring homeowners can smell blood,” he said.

Shaw added that first-time buyers are in an incredibly strong position, and it is not uncommon to see them agreeing on purchases at 10% to 15% below the marketed price.

“It must be hard for estate agents trying to manage vendor expectations; however, this is a sign of the times, and those sellers that do not take a fair offer now could find they are much more out of pocket in a month or two,” Shaw said.

Jamie Lennox (pictured right), director at Dimora Mortgages, agreed with Shaw that current market conditions are playing out perfectly for certain first-time buyers.

“Locally, we are seeing big reductions in asking prices compared to recent years, and for those first-time buyers who can stomach and afford the higher interest rates, now is a great time to get on to the property ladder at a lower entry price,” he said.

Lennox added that buying while rates are as high as they are at present gives great reassurance on their future affordability, knowing they can handle periods of less favourable rates.

Catch-22 for first-time buyers

By contrast, Joe Garner, founder and managing director at Joe Garner Consulting, said from what he has seen, first-time buyer activity is minimal due to borrowing costs and affordability.

The price of housing, Garner said, is irrelevant if the pool of buyers is unable to borrow money due to an inability to afford the repayments.

“For many first-time buyers, mortgage rates will need to drop significantly for them to achieve affordability criteria, however falling mortgage rates are likely to result in greater activity in the market, which will lead to house prices increasing,” he added.

Garner said it is a ‘catch-22’, and added that other than those who have perfect timing, it will be professional investors with cash who benefit from current market conditions rather than first-time buyers.

Stephen Perkins, managing director at Yellow Brick Mortgages, concurred with Garner, and adding that there has not been a resurgence yet.

“While house prices have started to reduce slightly, there has not yet been a large decrease; mortgage rates are also starting to ease, but these too need a greater drop,” he said.

Additionally, Perkins said that there has not yet been an influx of people being forced to sell due to their mortgage increases, with most simply re-structuring their mortgage to limit the impact.

As house prices fall, Perkins believes lenders will be less happy to provide high loan-to-value (LTV) mortgages, so the good news that house prices are cheaper is being counteracted by the fact first-time buyers need bigger deposits.

That being said, he added that most first-time buyers will likely be waiting and saving to get themselves ready to strike when the ideal buying conditions finally align.

Do you believe first-time buyer activity is holding up well? Let us know in the comment section below.