Challenges and opportunities for ambitious first time buyers in the coming year

The “mother and father bank” may be called in for more help in the new year, as ambitious first-time buyers deal with the double whammy of rising mortgage rates and soaring rental costs as they try to save.

But for those buyers who are able to jump onto the real estate ladder next year, there may also be some opportunities.

They may find that they have more bargaining power, a wider choice of properties and perhaps sellers are more willing to consider lower offers.

Some of those who have put their home ownership plans on hold may be weighing their options during the holiday season.

Simon Gammon, managing partner at mortgage broker Knight Frank Finance, said it might help first-time buyers if they were able to build up a larger deposit.

“If you can save in that kind of environment, you can make a larger deposit, and maybe rely on parents or grandparents to make more deposits, that will help you get, one, more mortgage options, and two, at a price,” Mr. Gammon told the Palestinian News Agency. Less, so it’s a double win.”

He continued: “I think the most proactive thing you can do right now is work on your deposit, as painful as that would be with all the other costs going on.

“But the higher the deposit, the better your options when it comes to a mortgage.”

He added that first-time buyers may also be able to use their chain-free status to secure a deal, at a time when there is generally more caution regarding the housing market.

Looking at the rental market, Gammon said many buy-to-let investors are taking out a mortgage at a time when interest rates are much lower.

With tenants also dealing with their own increased costs from a variety of bills, he added, “there will be a little battle between landlords willing to pass some of their increased costs on for what they can actually get.

“Because they don’t want to remove themselves from the market.”

He added, “There will probably be some realtors, maybe ‘accidental’ realtors, who haven’t sold their old house when they moved in or something, and they’ll say, ‘Well, that doesn’t work for me.'” More than that, all the tax changes over the past few years mean it’s become less and less profitable.”

But, he added, many buy-to-let investors are focused on the long term.

“You’ve got a lot of realtors who want to have a home for their kids in the future or it’s part of their retirement planning,” he said.

“So even if they have to find more money to support ownership of that property, it doesn’t detract from the reasons for owning it for the long term.”

“Rents are expected to rise further in 2023, adding to the impetus to buy, although raising the deposit will remain the biggest challenge for first-time buyers as the best mortgage rates will be lower,” said Richard Donnell, CEO of Zoopla. From loan to value.”

Rightmove real estate expert Tim Bannister said an immediate drop in demand in the first-time buyer sector was seen after the mini budget, as mortgage rates jumped.

There have been a series of BoE base rate hikes over the past year, the latest of which saw the base rate rise from 3% to 3.5% in December.

Mr Bannister said: “First-time buyers often push themselves to the limit to get up the ladder, and those who were in the early stages of their moving journey suddenly faced much higher monthly payments and quickly had to reassess their circumstances.

“As the new year approaches, signs are that things are starting to settle down, giving those looking to buy their first home a little more confidence.”

Mr Bannister continued: “However, first-time buyers still face the challenges of being able to borrow enough for the home they want, and saving towards their deposit.

10% deposit on the average first time buyer type property is now £22,169.

“Some first-time buyers in the new year may turn to Mother and Father’s bank for help, or more help, to increase the size of their deposits, and thus bring their monthly payments down to an affordable level.

First-time buyers who can afford to move next year may find they have more options, and more bargaining power, than they would during the pandemic frenzy, though they shouldn’t expect huge price drops or bargains next year.

“Moving up the ladder is still an objective for many, particularly as the alternative for many first-time buyers is paying record rental rates.”

Bannister said the average rental demand for new tenants outside London is 10% higher than it was a year ago. Within London they are 17% higher, he said.

He continued, “New tenants are facing record high rents due to demand far outstripping supply.

“This shortfall is made worse by the fact that some future first-time buyers will stay in their rented homes if they can, either because the mortgage interest rate is higher, or because their landlord is charging them a lower price than their new rent on the open market.”

Given current levels of tenant demand, Mr Bannister said rents are likely to continue to increase for new tenants in 2023.

He added, “However, we expect the pace of increases we have seen over the past two years to slow as tenants reach a ceiling of what they can afford and landlords increase rent with a desire to keep a good tenant as long as possible.”

In December, the government said the mortgage guarantee scheme, launched in April 2021 for first-time buyers, would be extended until the end of 2023.

The scheme, which helps people buy a home with a 5% deposit, was due to close at the end of 2022.

Lifetime Isas, which come with a bonus from the government, can also help people save for their first home.

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