FTBs may have to compromise on the timing or type of their move
There has arguably never been a more challenging time to get a foot on the property ladder.
Decades of rising prices have now collided with historically high interest rates, leaving first-time buyers facing new compromises on their homeownership ambitions – and in greater need of advice.
The gap between income and house prices reached record highs in 2022, said Jonathan Stinton (pictured), head of intermediary relationships at Coventry Building Society
No wonder a recent survey by Money.co.uk found that 88.8% of first-time buyers said they had to make significant compromises when purchasing a home.
“It leaves the majority of first-time buyers with two options; they either buy with the money they already have but with a limited choice of property, or they wait longer to save more of a deposit,” he said.
The savings challenge
Most first-time buyers are in the 25-34 age bracket, but as Stinton points out, this is still a very broad demographic, so the compromises they may need to make in order to afford a home can vary.
“They could be a young professional who needs to live with family while they save for their first flat, or a new family who rent somewhere smaller than they would like; either way it is likely that saving for the deposit will involve some degree of sacrifice,” he said.
For those looking for a place of their own, Stinton said it still is a price worth paying, and is likely to prove a sound investment given the fundamentals of the UK market.
He believes the role of brokers will be more vital than ever this year as inflation and interest rates challenge first-time buyers.
“Brokers can help them face those challenges, providing insight and advice which assists buyers step onto the property ladder with confidence,” Stinton said.
The value of expert advice
Coventry Building Society recently published a guide for brokers to the first-time buyer economy. The research sought to highlight the challenges first-time buyers are facing in today’s market. It also highlights several areas where professional advice can be valuable.
For example, while first-time buyers were ordinarily prepared for moving costs and legal fees, “some enter the process unaware of, or underestimating, expenses such as Stamp Duty, valuation fees and mortgage product fees,” the report said.
How first-time buyers are responding
Some prospective first-time buyers are putting off joining the property ladder now due to increasing interest rates, staying put and continuing to live at home to ride out the storm, said Lyn Webb, director of Mortgage Saving Experts in collaboration with Barry Webb, chief executive of Mortgage Saving Experts.
Webb noted that first-time buyers are very important to the health of the market, as governments have recognised over the years with schemes such as Shared Equity and Help to Buy.
Webb said she has noticed first-time buyers rethinking their original plans due to the increased cost of rent and bills, such as food and utilities
“Others are perhaps looking in a less expensive area, a little further afield from where they first wanted to live, which may mean a longer commute or being further away from friends or family than first planned or looking for a cheaper property that may need work,” she said.
What compromises are you seeing customers make in order to access the housing market? Let us know in the comments.
