Mortgages  

First-time buyers should recognise current 'opportunities'

First-time buyers should recognise current 'opportunities'
 Pexels/Karolina Grabowska

Recent figures show us just how big an impact the Covid-19 crisis has had on young generations.

According to the Resolution Foundation, younger workers have been one of the hardest hit groups during the pandemic, with a third of 18-24 year olds having lost their job or been placed on furlough. Furthermore, one in three of those in the same age group have seen their pay reduced as a result of the crisis, which is more than any other demographic.

The sad truth is that thousands of young people will now be in a much less stable position financially than they were before the pandemic. And for many, this will mean that their financial goals, such as buying their first home, have been pushed further out of reach.

While the crisis has brought about new hurdles for the first-time buyer community, there are reasons to be optimistic.

Indeed, further government support came in the form of a 95 per cent mortgage guarantee scheme in the chancellor’s latest Budget, with first-time buyers set to be the sole beneficiary. With several of the major banks confirmed to offer the scheme, this will go some way towards supporting a key customer segment with lending.

However, this will not be the only lifeline available to first-time buyers over the coming months, and it is important to recognise the other opportunities for this market.

Stamp duty’s impact on housing stock

The stamp duty holiday is on everyone’s minds at the moment. Launched in July last year, the measure has gone a long way towards stimulating the housing market after its spring hiatus, and the tapered extension announced in the March Budget will have been music to the ears of many buyers who are hoping to benefit from the tax cut before it ends.

The extension may also have a promising knock-on impact on the availability of suitable housing stock for first-time buyers. Research by Savills in January found that second-steppers were expected to lose out the most when the stamp duty holiday was originally due to end in March, with the tax break of particular benefit to this community.

However, with the new extension, more second-time buyers looking for larger properties may be encouraged to make their purchases before the tax cut ends, freeing up housing stock that is more suited to first-time buyers, such as one and two-bed flats.

Low deposit mortgages returning

Mortgage lenders, like many other businesses, have had to adapt to the economic uncertainty of Covid-19 to protect their service levels and satisfy risk appetite. To this end, many lenders restricted higher loan-to-value lending at the start of the pandemic, which presented challenges for first-time buyers who typically benefit the most from low deposit mortgages.

Even before the announcement of the government’s 95 per cent mortgage scheme, we were starting to see lenders return to the higher LTV market – an extremely promising sign for first-time buyers.