Window of opportunity closing for first-time buyers?

The window of opportunity for first-ime buyers is always open, but we are about to see the unleashing of pent-up demand in the market in the New Year. The stumbling block in the market in 2023 has been the reluctance of people who are already on the ladder to list their houses for sale due to the increase in mortgage rates. Some of these home-owners will realise once and for all over the festive period that their current property is indeed too small for their needs and we will see many more homes come onto the market in late January. The days of close-to-zero mortgage rates may now be gone, but as inflation nears its arbitrary 2% target, mortgage lenders will have the confidence to shave a few more points off their fixed rates and this could be the news buyers have been waiting for to spur them back into action.

Whatever happens in 2024, the landscape for first-time buyers has changed probably for many years to come. Gone are the super low interest rates, up are the costs of living, and the alternative of renting seems to be getting more expensive by the month. Historically, first-time buyers tended to wait until they thought the market had bottomed out before purchasing, but the current availability and costs of renting means they are less likely to wait now. With inflation falling, and mortgage rates likely to fall further, albeit nowhere near 2021 levels, I feel this will result in more first-time buyers entering the market, provided of course, there is sufficient housing stock for them to buy. Of course, if housing stock is in short supply, this would then push prices back up again. 2024 is going to be an interesting year.

We think what is needed is stability. It is probably too early to be talking about property prices increasing. We are expecting lenders to keep cutting their margins, as they need to sell mortgages, but expect the Bank of England to cut their rates in the Spring. However if we can see stability rather bust then boom again, that will be better for all.

The window of opportunity isn’t closing because it wasn’t ever open!

House prices have stalled at best, however, with a dangerously low supply and interest rates at 5% we will never see a first time buyers market again.

First time buyers will be defined solely by their ability to borrow a deposit from their family. Even a well paid job is no longer a pathway to home ownership.

It's unlikely that we will see rates cut sooner than Q2. What is needed is stability and a return of buyer confidence. We've seen a determination in our clients to continue to buy regardless of interest rates and economic challenges, but it's required them to drive harder bargains and rely on a great deal of creative thinking. The old saying holds true: "Don't wait to buy property; buy property and wait."

The drop in inflation in November was more than expected and most welcome. It is now highly likely that the base rate will be reduced in either February or March, with the latter the most likely. The New Year bounce in property will be in full swing with agents returning full of optimism as well as turkey and this will see an upsurge in the property market which will be heightened by the base rate being reduced at the end of Q1. By April, it will shift to a sellers' market again with property prices edging up. The real challenge is that this will not be supported by Land Registery completions so it is likely brokers will be fighting against down valuations in the short term. My advice to first-time buyers is to be active on Rightmove on Boxing Day, which is statistically the day of the year when most property is listed, and get out viewing early in 2024 to use the market to your advantage when offering.

As we look towards Q1 there is a sense of optimism in the market, especially for sellers. For the latter part of 2023, there has been a power shift over to the buyers who have been able to bag themselves a good deal despite rates being high. First-time buyers are always in a good position, being chain-free, so there will always be opportunities. Let's hope for stability and confidence back in the market for 2024.

No, the window for first-time buyers is not closing. If anything the window is open wider than ever. In the past few years, more and more lenders have become open to smaller and smaller deposits in more and more situations. More lenders have started to allow a 5% deposit on new build properties, more have begun to accept a 5% deposit on flats, and recently Skipton Building Society even started accepting 5% deposit on new build flats, compared to 20% needed with some of the big lenders. We also see criteria loosening up meaning more first-time buyers will qualify with more lenders and lenders look to attract more customers for reasons other than having the lowest rate. For example, Accord and Nationwide have recently improved their rules for foreign nationals.

House prices are likelyh to continue to edge up in the coming months, as demand is still outstripping supply. We simply do not build enough houses for the number of people we need and there is not enough stock. The past 18 months have seen a correction in the property market, but we still have historically low interest rates. The decade or more of ultra-low rates was really just a blip. First-time buyers are in a brilliant position: they still can negotiate on their purchase price and, if rates come down as expected either during the buying process they can make a further saving or when they will remortgage. Once rates reduce further it will open up the gates of Mordor and we will have a similar frenzy like we did post-Covid as there is a huge amount of pent-up demand.

There are several unwavering truths that we need to remember: over time, property prices will rise, interest rates will move up, and interest rates will move down. Very much like there is no "perfect time" to have children, there is no "perfect time" to buy a property. If you want to own your own home, have the deposit saved and are comfortable with the mortgage repayments then crack on: waiting is very often not going to produce the savings you may think, or are led to believe.

In 2023, first-time buyers were unquestionably the most active of any buyer type and, driven by a combination of positive inflation data, continued reduction in mortgage rates, reduced competition from landlords and relaxation of lending and affordability criteria, 2024 seems set to see further opportunities for those looking to take their first steps on the property ladder. Lower interest rates should make mortgages more affordable and higher budgets potentially achievable so even if property prices do edge up, first-time buyers will undoubtedly continue to be the fuel that sparks the property market fire.