In the Halifax July house price index published earlier, Kim Kinnaird, director of Halifax Mortgages, said “we’re seeing activity amongst first-time buyers hold up relatively well”, but experts were divided about the level of demand and cautioned many aspiring homeowners are facing a Catch-22.
Joe Garner, managing director of property consultants, Joe Garner Consulting, explained: “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. It’s a Catch-22.”
On the ground, brokers and property experts were divided about the level of demand from first-time buyers, with some reporting it’s strong, while others saying they haven’t seen a resurgence of first-time buyer activity yet.
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said demand among first-time buyers is not just holding up, but is firing on all cylinders: “We’ve seen more first-time buyers in the past two weeks than in the previous 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.”
Kirsty Wells, director of Saint Leonards-on-Sea-based Blueprint Mortgages, delivered much the same verdict: “In the past few months, I have had a big increase in enquiries from first-time buyers. They are in a much stronger position currently as so many people have their properties on the market but can’t sell so building a chain is very tricky, whereas if a first-time buyer can come along and save the day, then they can negotiate a better price”.
That view was shared by Lee Gathercole, co-founder at Peterborough-based mortgage broker, Rebus Financial Services: “It certainly seems like a good time to buy when looking at the average value of property compared to last year. There is considerably less competition for buyers in the market and it was only a year ago that everyone was fighting for properties and paying over the asking price. Right now, first-time buyers are in a really strong position when it comes to negotiating on price.”
And when they are negotiating, many first-time buyers are doing it with landlords, who are increasingly selling up for affordability and regulatory reasons. Elliott Culley, director at Hayling Island-based Switch Mortgage Finance said: “I have seen many first-time buyers purchasing properties being sold by landlords at reduced prices.”
Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages, also noted the surge in enquiries from people aspiring to get onto the property ladder as prices come down: “For certain first-time buyers, current market conditions are playing out perfectly. 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 onto the property ladder at a lower entry price. Also, buying while rates are as high as they are at present gives great reassurance to their future affordability, knowing they can handle periods of less favourable rates.”
But not all brokers are seeing strong activity levels among first-time buyers, with one warning that lenders may be cautious at higher loan-to-values as house prices come under pressure.
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, concluded: “We haven’t seen a resurgence of first-time buyer activity yet. Also, as house prices fall, lenders will be less happy to provide high loan-to-value 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, most first-time buyers will likely be waiting and saving and getting themselves ready to strike when the ideal buying conditions finally align for them. That may not be far off.”