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Sales of new homes to First time buyers

ended 27. April 2023

Sales of new homes to first-time buyers are struggling, according to the housebuilder Persimmon, as higher interest rates make mortgages less affordable.

The company, which is one of the UK’s largest domestic property developers, said people looking to get on the housing ladder were facing “stretched affordability” and less choice on home loans.

Rising mortgage rates have led to higher loan-to-value ratios for first-time buyers, “particularly in regions with higher house prices”, Persimmon said in a statement to the stock market on Wednesday.

It would be good to get your thoughts on this:

  • Are first-time buyers facing “stretched affordability” and less choice on home loans, as claimed by Persimmon?
  • Rising mortgage rates have led to higher loan-to-value ratios for FTBs. Is this true?
  • What advice would you give to FTBs when it comes to getting onto the property ladder

4 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
It's the worst time to be a first time buyer in over 15 years, as higher rates have pushed most people further away from entering the market. Builders, notorious for not offering discounts, are now seeing their selling prices being eroded to generate interest. This is just a short term blip, to manage inflation downwards, and interest rates should halve over the rest of the year. That's when house builders sales, and share prices will recover.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
I think the drop seen is due to the Help To Buy incentive being removed and the lack of affordable housing schemes which have driven the New Build property market in recent years. Some of the schemes where you are offered a discount on the market value are a lot more 'off-putting for buyers' due to the restrictions when they wish to sell the home. The discount is often needed to be passed on to the next buyer which can be off-putting for some. Whereas the Help To Buy would be repaid upon the sale of the home, not impacting the new buyer at all. Something for the team at uk.gov to think about!
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Graham Cox
Director at Bridging Hub
I'm not surprised Persimmon are citing 'stretched affordability'. Affordability is stretched because house prices are too high, particularly new builds which sell at a premium.

Persimmon are hoping for a Help to Buy replacement but that would be a huge mistake in my opinion.

Lenders affordability calculations are especially tight for those on lower incomes, which many first-time buyers are. Some lenders also have a lower maximum loan to value on new build properties which makes it all the more difficult for buyers to raise the deposit.

I believe house price falls will accelerate over the coming months. I'd also be willing to bet the Halifax reporting house prices rising for the past two months will look like an anomaly by the summer.
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Jamie Lennox
Director at Dimora Mortgages
Help to buy was a huge incentive for first time buyers to lean towards purchasing a new build property, with the scheme now finished with no adequate replacement it's no surprise there is a slow down on sale of new build homes to first time buyers. With rates as high as they are buyers are having to be more cautious on what they pay for their first home to keep their mortgage costs down, which often is ruling out new build property as they typically come with an inflated price to reflect the property being brand new.

To add to this, many new builds won't come with flooring, or any landscaping to
the garden so this could also be putting off buyers off as they won't have the disposable income to pay for these due to a lack of disposable income while rates and mortgages payments are so high.