2023 was with fraught with challenges for first-time buyers but the landscape is 2024 is very different, says senior mortgage broker, Gemma Bennett. Here she explains why beginning your homeownership journey now could be a smart move
Have you been tentatively watching the mortgage market through the ups and downs (mainly ‘ups’ when it comes to mortgage rates) of the last year?
If so, you will know it’s been a tense time for many.
Those who have mortgages are being hit financially if their remortgage date fell within 2023 – many have seen repayments increase by an average of £500 per month.
But what if you are a first-time buyer? How has the last year impacted you and your plans for homeownership?
Setting the scene – why 2023 was a challenging year for first-time buyers
On the one hand, as rates increased, lenders tightened affordability and therefore became a little stricter on how much they would lend you.
Your monthly repayments were looking to be higher due to the rate increases. In some months they moved up quite rapidly whilst you looked at properties.
As an added blow, Help to Buy, the government-backed scheme to help first time buyers buy new build properties came to an end.
Meanwhile, there were fewer properties on the market due to market instability and homeowners choosing to stay put. Rental payments increased as a result of rising interest rates and this would affect your ability to save for further deposit.
But it was not all bad for first-time buyers. Property prices started to reduce or as some suggested ‘correct’ after a spell of rapid inflation in house prices over the pandemic years. This was potentially a great opportunity for first-time buyers.
What’s more, stamp duty reliefs and incentives for first-time buyers were and still are effective.
It is completely understandable, then, why many first-time buyers began discussions with brokers but decided to not to make a move, choosing instead to watch and wait and see how the market starts to settle.
It’s daunting enough buying your first property, to feel such unrest and let’s face it drama in the market and press. It would be natural to feel cautious.
Going forward – why 2024 could be the year for first-time buyers
Here we are a new year – and let me tell you it’s started with a bang!
There’s a very welcome and exciting feeling of well-needed confidence – a confidence which has led to most lenders reducing their rates. It’s been happening almost daily since we returned to work in the new year.
The lenders set their prices based on SWAPs. This is the rate at which they buy money. The lowering of mortgage fixed rates suggests a confidence that over the next five years rates will gradually continue to reduce.
As a consequence, the housing market has got busier again with buyers and sellers getting in touch with estate agents.
Another subject making headlines, is that house prices are starting to increase again,
The increases may be minimal but leads me to suggest that NOW could be the best time for first-time buyers to actively start pursuing their home purchasing goals.
Here’s why:
- Rates are lower and lowering
- House prices have adjusted and lowered and may be at their lowest right now
- You will continue to benefit from the stamp duty reliefs in place for first-time buyers
- More properties to appear on the market
- Lenders are feeling slightly more confident, and some have gained generosity within their background affordability calculations
The bigger picture on mortgage prices – don’t just look at the interest rate
I’d like to add some perspective when it comes to mortgage rates.
Focus on your monthly budget more than the rates as a percentage. Your average mortgage term is 25 to 40 years. Within this time the market will go through ups and downs. Right now, you’d be entering the market at the higher rate end, but as the years go by, you’ll likely benefit from lower rates at some point within that term.
This will enable you to pay less each month or perhaps keep the payments the same and pay off your mortgage quicker.
It is not expected that rates will go as low as they were between 2020 and 2022 for a very long time. Waiting for that will be a mistake.
It’s also not expected that rates will drop dramatically over the next few months, but instead reprice gradually.
It is always recommended to speak to a broker to ensure you the best advice for your personal needs and circumstances.
The next steps…
If you have decided to make your move onto the property ladder, you may be wondering what steps to take next.
To help you, my colleague Sonya Matharu, has written a five-point guide to get you going. It will be published next week, so watch this space.
Gemma Bennett is a senior mortgage broker for The Mortgage Mum
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Connect with The Mortgage Mum team
You can connect with Sonya via her website www.sonyamatharu.com and you can contact Gemma via email Gemma@themortgagemum.co.uk: or at her website, here.
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