Making the most of robust first-time buyer demand

August can often prove to be a notoriously slow month in terms of activity and volume as the UK, and most of Europe, appears to either be on holiday or undertaking child care duties.

Related topics:  Mortgages
Craig Calder
26th September 2016
Craig Calder Barclays
"Not that it’s without its fair share of challenges – especially for first-time buyers – although demand among such borrowers shows little sign of any waning anytime soon."

This is often reflected by a lull in the housing market and this year has been no different. However, according to recent data from Rightmove, UK house prices are said to have made a small seasonal rebound in September after falling for the previous two months. The average asking price of properties advertised on the online portal rose by 0.7% in the four weeks to September 19, meeting expectations of an early-autumn rebound in prices.

This seasonal recovery was reported to be ‘not quite as strong’ as in previous years but it does serve to underline the robust nature of the marketplace and the increased level of stability coursing through it. Not that it’s without its fair share of challenges – especially for first-time buyers – although demand among such borrowers shows little sign of any waning anytime soon.

As the main sponsor of the recent London Home Show Autumn 2016 it was great to see such passion and energy emanating from so many potential first-time buyers. This really emphasised just how important the homeownership dream is to so many people. With house prices maintaining such high levels, it was also refreshing to hear that the majority of people we spoke to were not only suitably committed to achieving their homeownership goal but also realistic about how to achieve it.

As such it was no surprise to see a recent survey from Barratt Homes which suggested that 77% of first-time buyers were choosing to compromise on things they initially thought were important to them. It outlined that despite being highlighted as key factors for choosing a home, location, house size and gardens were the areas where most buyers compromised when buying their home. 1 in 6 were said to end up going for a smaller property with one less bedroom, whilst 28% compromised on their location. Getting a foot on the property market still signifies a big achievement and while only half of FTBs surveyed planned on staying in their first homes for more than a year, 71% of people were suggested to end up staying in their first homes for four or more years. Compromise also comes at a cost though with the research showing that despite settling for less than their dream home, prospective homeowners spent an average £12,000 more than first intended.

In terms of products, there remains a wealth of competitive deals available within such a low interest rate environment, although there has been a slight dip at higher LTV levels – as outlined in recent analysis by AmTrust and Moneyfacts. Data for August highlighted that the number of available mortgages for those with 5% deposits fell from July’s figure of 243 to 238, a difference of five and the only LTV bracket to fall month-on-month. This was said to be the second month in a row to see the number of 95% LTV mortgages decrease (from 249 in June to 243 in July). By comparison, the number of available products for those with larger deposits were said to have risen month-on-month. For those with 20% deposits the number of mortgages rose most – 10 month-on-month – from 597 in July to 607 in August.

In slightly better news for FTBs, mortgage rates were reported to have fallen to fresh lows, with the average rate for a 95% LTV mortgage down by 0.46% year-on-year to stand at 3.86%. In comparison, the average rate at 75% LTV fell by a lesser 0.15% on an annual basis to 1.72%; this means that the rate difference between the two has fallen to a record low of 2.14%, so FTBs won't have to pay quite the premium that they once did.

There is some obvious good, and not so good, news here but in many respects there is nothing particularly surprising. Harking back to recent FTB interactions it was also evident that the majority were far more aware of the increased need for advice. Mortgage intermediaries at the aforementioned show proved to be a huge hit and were inundated with questions surrounding different types of products and schemes currently available. This need for advice is not just apparent in the capital. Up and down the UK there are hundreds of thousands of potential FTBs waiting in the wings. And, as ever, it will be the most proactive intermediaries who remain best positioned to make the most of this heightened demand.

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