Will Brexit help first time buyers?

When house prices fall, the group who don’t complain are first time buyers. OnTheMarket.com considers what Brexit may have in store for those who want to get on the property ladder.

First time buyers have spent months, if not years, looking at properties in estate agents’ windows staring at the asking prices and watching house prices rise. Now, with the possibility of a post-Brexit slowdown in the housing market, they can see a chink of light at the end of the tunnel.

How far house prices will fall (if at all) in the second half of the year is debated. The market was already showing signs of slowing down, partly because of the pre-Brexit uncertainty, and partly because of other factors such as the rise in stamp duty in April. Now prices are likely to go into reverse, according to most experts. KPMG has predicted a fall of five per cent in the next 12 months and others are starting to come up with similar figures.

Interest rates could also fall, which would reduce mortgage payments and give first time buyers another reason to smile. The Governor of the Bank of England – Mark Carney – has already signalled his willingness to cut rates if he feels it is the best way to counter any adverse economic effects of the Brexit vote.

But it would be rash for first time buyers to assume that all the chips have suddenly fallen into their laps. Some of the shares that were hit hardest in the wake of the Brexit vote were construction companies, whose carefully laid plans have been hit by the continuing political uncertainty. Some have fallen by as much as 37 per cent.

The problem of under-supply in the housing market has been well documented and successive governments have failed to meet their targets for building new homes. The lack of affordable housing in London dominated the mayoral race in May and will still be a hot topic of debate at Westminster once all the other burning political issues have been resolved. But nobody is predicting a sudden surge in housebuilding.

And if builders are cautious about how many new houses to build, banks and other mortgage lenders will also be cautious. “They do not want to sound the alarm, but they are not yet prepared to say that all is well,” says Simon Gammon of Knight Frank Finance. “They are watching developments.” Lenders will be asking themselves if they should tighten their eligibility or insist on larger deposits.

Lucian Cook, Head of Residential Research at Savills UK, summarises the dilemma faced by first time buyers: “Ironically, while price growth is likely to abate, first time buyers are not likely to find the market any more accessible. Banks are expected to tighten their lending criteria and become stricter on loan-to-value and loan-to-income ratio.”

Given the current circumstances, first time buyers would be well advised to bear in mind the following points:

1. Keep shopping around for affordable properties and ensure you set-up a property alert with OnTheMarket.com to see our ‘new & exclusive’ properties 24 hours or more ahead of any other portal. You will be pleasantly surprised by what you see. All sorts of sellers, for all sorts of reasons, are likely to be dropping their prices this autumn.

2. Shop around for the best mortgage deals. Some lenders will be bullish in the present climate, some more cautious. And if you have already found a lender prepared to offer you a conditional loan, double-check with them that the offer still holds post-Brexit.

3. Make sure you have a mortgage agreement in principle in place. This will show agents and vendors that you are serious ‘ready-to-go’ buyers when you want to make an offer on a property.

4. Do everything you can to build up the equity you can put into a property, even if it means a visit to the Bank of Mum and Dad.

5. Look at slightly left-field options such as shared ownership schemes. There is bound to be a shake-up in the housing market post-Brexit and even if nobody is quite sure what the market will look like when the dust settles, there are bound to be new opportunities for first time buyers.

6. The warm summer days may be here but it is a time to save. Put off your next holiday for a few months. Save money for your deposit now and you will reap the rewards later. Read advice from OnTheMarket.com and The Money Advice Service on how to make your deposit go further.

Making the first leap on the housing ladder is never going to be easy. Yet Brexit may give first time buyers across the UK opportunities that should not be missed.

Content provided by OnTheMarket.com is for information purposes only. Independent and professional advice should be taken before buying, selling, letting or renting property, or buying financial products.

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