Tough climate ahead for first-time buyers


First-time buyers face a series of hurdles that will require extremely careful planning, a mortgage and insurance specialist has stated.

As the cost of living crisis deepens, with sterling crashing to record lows and the Bank of England launched a £65bn temporary quantitative easing move to calm markets, advisers have been having ever-more difficult conversations with first-time buyers. 

Speaking on the latest FTAdviser fireside chat, Joanna Streames, founder of Velvet Mortgage and Insure Services, talked of a series of hurdles that started to be put in place in the pandemic and throughout 2021 and 2022.

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"If you were a first-time buyer, it became really, really tough and there has been a lot of uncertainty."

But while the pandemic is "becoming history" and lenders are not asking about furlough, there are other problems facing first-time buyers now. 

Streames told FTAdviser intern Lucy Evans that affordability is going to become a more important discussion.

"We are coming into the cost of living crisis, with energy prices rising and the war in Ukraine affecting things. 

"It is vital, more than ever, that first-time buyers get advice from a broker.

"They always need that extra bit of handholding when getting onto the property ladder, and right now they really do need to put more planning in.

"We don't want them getting onto the ladder and just about being able to afford it, and not accounting for energy bills going up. The cost of living crisis is getting worse."

But while Streames said it would be great to see more 5 per cent deposit deals coming onto the market, it was highly unlikely, given the current lending market. 

Given latest news that hundreds of mortgage products have been withdrawn from the market as lenders are forced to pull and reprice to match ever-rising BoE base rates, Streames said it would become harder for first-time buyers to get a decent deal now.

She also told Evans that help from the family might become harder to come by as the cost of living crisis deepens.

Streames said: "There have also been a lot of gifts from mum and dad over the years but the tricky bit now is that mum and dad are now feeling the pinch, with their own mortgage rates going up and gas prices rising.

"I can see it will be tougher for first-time buyers to gather and save for their mortgage. They need to be planning well before they want to buy."

She added:  "If you ever want to buy your home, start saving now. Cut cots now and put that money into a deposit pot even if it's not your intention to buy now any time in the next five years."

To watch the full video, click on the image above.