Has COVID made it even harder for first time buyers to get on the property ladder?
Purchasing a first home has never been as difficult for couples starting out together.
The current Stamp Duty holiday and the much publicised increase in activity across the housing market suggest this is a great time to buy. However, at the same time, rising prices, changes in lending policies and the need to put down a bigger deposit have all contributed to making it tougher than ever and unfortunately it looks as though Covid may have made it even harder for first time buyers to get on the property ladder.
The economic uncertainty caused by the pandemic has affected the availability of mortgages, loans and other credit facilities. This means that the 5% deposits promised before lockdown are no longer available and potential buyers are being asked to at least double if not treble their outlay to secure a mortgage as lenders continue to put increasingly rigorous conditions in place in a bid to protect themselves against potential defaults.
And having to come up with a larger deposit is placing strain on other parts of the purchasing process. Many couples have said they may be able to find the additional funds but it would leave them with nothing to cover solicitors’ fees, the albeit lower levels of Stamp Duty, the removal men and any necessary renovations. This is, understandably, making first time buyers think twice.
The current uncertainty in the employment market is also taking its toll.
Even if the money for a higher deposit and monthly mortgage payments is available, many younger professionals are worried about the future of their jobs and their employers’ futures. Many of us have recently felt the effects the furlough scheme on our salaries and with many other companies struggling to be able to make any promises as to what may happen in their future, there is a widespread reluctance to take on significant long-term financial commitments.
Worse still prices are likely to continue to increase as the housing market continues to report high levels of activity and (as we covered in a previous blog) increased demand for UK properties from overseas investors. Some property experts believe this spike could be just that and may dip as quickly as it rose once the sales that ‘backed up’ during lockdown go through. Others are much more confident and believe the continued Stamp Duty holiday will continue to persuade people to take advantage.
However the market develops it seems that again it’s first time buyers who have come off worst, especially in London where prices are always markedly higher than anywhere else in the country. As always we would urge first time buyers to proceed with extreme caution and explore every aspect of a potential purchase with the relevant professional advisers. The deals – both in terms of finding and financing your dream first home – may be out there, but please make sure you’re not going to overstretch yourself or put your future at risk in any way.
If you are planning to move house and would like to discuss anything else relating to the sale of your current house or the purchase of your new home, please email me at Jeremy.Tulloch@collinshoy.com or call me on 0208 515 6600.