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Are first-time buyers getting locked out of the mortgage market?

MORTGAGES | 30.09.2020

The property market has continued the ‘mini-boom’ it experienced when lockdown measures were initially eased. Seeing homes being sold over the asking price rising to the highest levels in 5 years, at least according to research by the National Association of Estate Agents (NAEA).

However, fears that first-time buyers are being squeezed out of the current market have started to grow, as economists predict that the current boom will begin to fade.

Spurred by stamp duty holiday

Of course the stamp duty holiday has had an impact, helping to foster a surge in the UK housing market activity. It allowed buyers to get homes up to the value of £500k in England and Northern Ireland without paying stamp duty until the 31st of March next year.  However, the rise that was instigated by the stamp duty holiday and the release of pent-up demand is predicted to wane. Overall visits to the 3 main property websites have started to decrease, according to economists. Even though estate agents reported that 13% of homes sold for more than the asking price, the majority of buyers managed to get a discount in August. The NAEA stated that 53% of properties actually sold for less than the original asking price. With research showing that demand was starting to decrease, as the number of potential buyers registered per estate agent branch fell 396 in August, as opposed to 428 the month before. 

Demand has dropped for first-time buyers

Research from property websites such as Zoopla has highlighted how first-time buyers have been overtaken by existing homeowners as the biggest source of demand in the market. This has been blamed on the changing situation caused by the on-going pandemic, which has seemingly shut out younger families. This trend follows news that many low deposit mortgages have been taken off the market over the last few months, with lenders getting more and more cautious. Last year, according to Zoopla, first-time buyers with a mortgage accounted for 35% of sales while existing homeowners with a mortgage made up 34% - this has now been reversed for this year. Zoopla has predicted that this trend will continue into 2021, where first-time buyers will make up just 32% of sales. First-time buyers still remain a key buyer group. However, the lower availability of higher loan-to-value mortgages and increased movement by existing homeowners has weakened the demand from those looking to step foot onto the housing ladder.   

Speak to TaylorMade

It’s difficult to predict what will happen to the mortgage market due to the pandemic, and things are still very much in flux.  As mortgage brokers in Manchester, we’ve been helping people find the very best deals on the market. With remortgage applications increasing, it’s a good idea to act sooner rather than later as remortgaging can take time and lenders will be extremely busy.  We also offer expert help for first-time buyers too, and we’ll work to try and find you the best deals during these difficult times. Our experts can guide you through the entire process; from your first credit check, to the moment you’re handed the keys to your new home. Contact us today for help
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