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The Lost Generation: Advising Today’s First Time Buyers

The proportion of first time buyers entering the housing market has reached an unprecedented high. Even pre-credit crunch, the number of bright young things deciding to clamber onto the first – and arguably highest – rung of the property ladder was a modest figure compared to the numbers released by Reuters this week.

So far in 2014, 46% of all residential property transactions included a first time buyer. You would be mistaken, however, in thinking that these transactions are low-cost, inner city purchases; the first buyers of today couldn’t be more different from their ‘Noughties’ counterparts.

Older and Wiser
As we grew accustomed to the recession, first time buyers also grew up: The average age of a first time buyer is now up from 28 in 2009 to 30 nationally. The associated surge in property purchase by more financially-secure and better informed first timers has finally indicated some economic recovery, which has been supported by the Government’s Help to Buy Scheme. The Chancellor of the Exchequer has been so pleased with the results that he has permitted the scheme to run until 2020 in spite of IMF concerns that it may cause another housing bubble to burst.

Still hostile…
Unfortunately, these promising statistics are not wholly representative of the pitfalls still out there for first time buyers. The scheme’s mortgage subsidies have not mitigated the requirement of large deposits entirely, and although first time buyers have bided their time and forked out their savings, the National Association of Estate Agents (NAEA) have forecasted an IMF crackdown on the Help to Buy Scheme before the year is out. As the mortgage subsidies begin to ebb away some first timers may feel under pressure to sneak in an offer before the scheme passes. If timing is everything in property, then this appears sound, but the demise of Help to Buy does not bode well; especially in relation to the Mortgage Market Review.

LOFT APARTMENT

The MMR ‘Vaccine’
Managing Director of the NAEA Mark Hayward cites the Mortgage Market Review as the death knell for some first time buyer aspirations. The invasive checks introduced in April now force prospective purchasers to demonstrate whether they could carry on making their mortgage repayments should interest rates rise; known as a ‘stress test’. The introduction of the MMR alongside the demise of Help to Buy symbolizes the caution surrounding the property market, as it continues to make a slow but steady recovery.

The best advice is therefore to act quickly but also with consideration. Here is our ‘traffic light’ advice for first time buyers. Answer all three with a ‘yes’ and you’re green to go!

London_traffic-lights

  1. Recognise the current advantages of the Help to Buy Scheme while being mindful of your Mortgage Market Review. Can you afford to purchase if interest rates change suddenly?
  2. Seek advice as to the terms and conditions of your mortgage. Do you understand the obligations you owe to your lender should your circumstances change?
  3. Consider any ‘hidden costs’ associated with your property purchase. Can you afford to arrange your mortgage, instruct a solicitor, commission searches, factor in Stamp Duty and insure the property before the paint charts and swatches can be brought out?

See you first time buyers at the finish line!