First-time Buyer  

Thousands of first-time buyers spooked by rate rise

Thousands of first-time buyers spooked by rate rise

One in 10 first-time buyers could be put off buying a property by a looming rise in interest rates.

About 8 per cent of potential homeowners aged between 18 and 40 said speculation about a rate rise was hindering their house buying plans, according to a report by Yorkshire Building Society.

The news comes ahead of an expected rise in the Bank of England’s base rate on Thursday (2 November), which would push up the cost of borrowing.

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Halifax estimated the number of first-time buyers reached 335,750 in 2016, meaning around 30,000 could reconsider their plans in light of a rate hike over the course of a year.

The Yorkshire’s First Time Buyers report found a far greater number of first-time buyers (44 per cent) saw high deposits as a barrier to purchasing a property, while a third (33 per cent) cited concerns about the cost of property in their local area.

It was recently reported that chancellor of the exchequer Philip Hammond had been considering borrowing £50bn in November’s Budget to ramp up housebuilding and ease the pressure on youngsters struggling to get on the ladder.

But Mr Hammond later said the proposal was not government policy, and many commentators believe a reduction in stamp duty – which is paid by 100 per cent of first-time buyers in London - is a more likely prospect.

The Yorkshire’s research shows young adults remain optimistic about the prospect of owning a property, with almost two thirds (65 per cent) believing it was likely or very likely that they would become homeowners and more than half (56 per cent) revealing they are currently saving money to buy their own home.
The majority of those surveyed also believe owning a home will be good for their future prospects, with more than four in five (83 per cent) saying they thought it would be a good investment.

Conducted by the National Centre for Social Research, the First Time Buyers report involved a survey of a nationally representative UK sample of 18 to 40 year olds to examine the attitudes and concerns they have towards buying their own home.

Mike Sims, senior mortgage manager at Yorkshire Building Society, said: “Our research shows that despite general uncertainty about Bank Rate rises and other challenges first-time buyers face, those looking to buy their first house are not being deterred.
“The mortgage market has been in unchartered territory for many years now and even with the prospect of rates rising it’s pleasing to see that many aspiring homeowners still believe owning their own home is in reach.”

Bob Riach, principal at Scunthorpe-based Riach Financial Advisers, commented: “I think it is more a deposit situation. I have done a first-time buyer mortgage this morning, and the rate was not the problem – it was getting the deposit.

“If we do get a rate rise, I only see it being a small one, which I don’t think will make a massive difference. We will then get a bit of a surge in people remortgaging on to better rates. There are still a lot of people on a variable rate.”