"136,000 potential new purchases could be in the throes of being completed, which would clearly add up to a lot of activity and potential business for all mortgage market stakeholders."
It’s perhaps little wonder that those who are completely new to house purchasing currently view the market with a large degree of trepidation and are therefore much more inclined to adopt a ‘wait and see’ approach, rather than putting their money with their collective mouths are.
All the pre-Brexit warnings we have seen over recent weeks and months, especially those in relation to what might happen if we leave the EU with ‘no deal’, have tended to concentrate on some rather cataclysmic outcomes. While no-one is suggesting these ‘worst case scenarios’ might end up happening, when you hear that the Bank of England has modelled for a house price drop of 30%, then it’s perhaps no wonder that potential first-time buyers might think now is not the right time to put their hard-saved money down.
The somewhat staggering aspect of One Family’s research in this area is the sheer number of potential first-timers who are being put off from purchasing, at least until they get some clarity on what the future might look like post-Brexit. It suggests that ‘at least 136,000 aspiring homeowners’ are currently waiting in the first-time buyer holding area, while two out of three first-time buyers believe purchasing before Brexit would be a bad financial decision on their part.
It’s hard to argue with such a position, given what we know – or rather don’t know – about what might happen next and the economic impact this could deliver. Indeed, as I write this, MPs within the Commons are embarking on the rest of the Brexit debate that was stopped before Christmas.
It’s hard for even seasoned political commentators to know what is going to happen after the vote takes place, let alone asking first-time buyers to take the plunge in making the biggest purchase of their lives, when no-one has any clue what will take place in the weeks and months ahead.
Clearly, this is bad news all round, because 136,000 potential new purchases could be in the throes of being completed, which would clearly add up to a lot of activity and potential business for all mortgage market stakeholders. These, after all, are would-be buyers who say they have enough money saved to put down a deposit, secure a mortgage and complete a purchase.
Cutting out this number from transaction statistics and, knowing that first-timers are the lifeblood of our market, makes this situation doubly dangerous. In any ‘normal year’ this would be seen as a very strong demand indicator and we might well be suggesting that the market was in for a very healthy 12-month period.
Perhaps, these first-timers are waiting for house prices to drop much further, so they get more bang for their buck? If so, then we might well caution them to be careful for what they wish for. While lenders currently appear to have a strong appetite to lend in this part of the market – and there is some very attractive pricing available – that might not always be the case, especially post-Brexit.
This could actually be the very best time for potential homeowners to make their move, given the lending situation, as there are no guarantees what the mortgage market might look like post-29th March. We’ve already seen some lenders having to halt lending – albeit temporarily – and there might be a great deal more ‘twitchiness’ from potential funders as we get closer to the UK leaving the EU. Let alone what might happen after that.
All in all, whilst one cannot blame potential purchasers for being cautious, it’s very important that the market continues to function effectively and where we do have borrowers wanting to buy, that we are able to facilitate these transactions and have the mortgage product availability to do this. For some however, this might simply be too much of a ‘leap of faith’ at present, and one hesitates to say it, but I think this number is likely to grow, the less political certainty we have.
