The latest fall in average house prices in the UK could be a "catch-22" for first time buyers, some brokers have argued.
Earlier this week (August 7), Halifax's latest house price index revealed a slight decrease in house prices over the month of July, marking the fourth consecutive month of decline.
Halifax Mortgages director, Kim Kinnaird said the data from the HPI showed activity amongst first-time buyers holding up "relatively well".
However, Joe Garner, managing director and founder of Joe Garner Consulting, cautioned this may not be good news for first-time buyers.
He said: "Falling mortgage rates are likely to result in greater activity in the market, which will lead to house prices increasing."
He cautioned that, for many first time buyers, mortgage rates will need to drop "significantly" for them to achieve affordability criteria.
This sentiment was echoed by Yellow Brick Mortgages managing director, Stephen Perkins, who said that, as house prices fall, lenders will be less happy to provide high loan-to-value mortgages.
He explained that the good news that house prices are falling is being "counteracted" by the fact first-time buyers need bigger deposits.
However, Perkins also acknowledged that most first-time buyers will likely be waiting, saving and getting themselves "ready to strike" when the ideal buying conditions appear and that those conditions "may not be far off”.
Switch Mortgage Finance director, Elliott Culley, added: "On the one hand, first-time buyers are in a strong position because house prices have been falling, but on the other side, they are having to pay much more on the mortgage repayments."
He stated that, in his experience, the first-time buyer market was stronger when rates were in the 4 per cents but acknowledged that as a result house prices were a bit stronger.
"It is a delicate balancing act now," he added.
However, some brokers have experienced a growth in enquiries from first-time buyers, such as Blueprint Mortgages & Protection director, Kirsty Wells.
Wells added that first-time buyers are in a "much stronger" position currently as so many people have their properties on the market but can't sell so building a chain is very tricky.
"Whereas if a first-time buyer can come along and save the day, then they can negotiate a better price," she explained.
A similar sentiment was shared by Rebus Financial Services co-founder, Lee Gathercole, who said: "There is considerably less competition for buyers in the market.
"It was only a year ago that everyone was fighting for properties and paying over the asking price.
"Right now, first-time buyers are in a really strong position when it comes to negotiating on price."
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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